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Viewing cable 08TORONTO73, Canadian Truckers Squeezed By Higher Costs and Slowing

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Reference ID Created Released Classification Origin
08TORONTO73 2008-03-17 16:37 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Consulate Toronto
VZCZCXRO7145
PP RUEHGA RUEHHA RUEHQU RUEHVC
DE RUEHON #0073/01 0771637
ZNR UUUUU ZZH
P 171637Z MAR 08
FM AMCONSUL TORONTO
TO RUEHC/SECSTATE WASHDC PRIORITY 2389
INFO RUCNCAN/ALCAN COLLECTIVE
RUEHME/AMEMBASSY MEXICO 0139
RUEAHLC/HOMELAND SECURITY CENTER WASHDC
RUCPDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 03 TORONTO 000073 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O.12958: N/A 
TAGS: ELAB ETRD PGOV PBTS CVIS CA
SUBJECT: Canadian Truckers Squeezed By Higher Costs and Slowing 
Trade 
 
 
Sensitive But Unclassified - protect accordingly. 
 
1. (SBU) SUMMARY:  Canadian truck transportation services employ 
close to 400,000 people and generate over C$60 billion in revenues 
annually.  The Canadian trucking industry is being squeezed by 
slowing export volumes (due to the appreciation of the Canadian 
dollar and the slowing of the U.S. economy), the rising price of 
fuel, and increasing insurance premiums.  Canadian truckers also 
complain that post-9/11 border security programs and a severe labor 
shortage are making their companies less profitable.  We need to 
continue our efforts to effectively demonstrate and communicate the 
real value of the C-TPAT, FAST, and PAPS programs to the companies 
that have invested significant resources to participate in them. 
END SUMMARY. 
 
------------------------------------------- 
Trucks are Vital Links in Canada-U.S. Trade 
------------------------------------------- 
 
2. (U) Over 82% of Canada's exports go to the U.S., and trucks haul 
70% of that trade (57% of exports, 80% of imports).  14 million 
trucks crossed the border in 2007, roughly one every 1.5 seconds, 
and more than two-thirds (68%) of those crossings were by 
Canadian-owned trucks. 
 
3. (U) More than 40% of Ontario's GDP depends on trade and 90% of 
its exports are destined for the United States.  At least 80% of the 
value of that Ontario-U.S. trade (75% exports, 83% imports) crosses 
the border by truck.  Trucks transport about 60% of Ontario's trade 
in motor vehicles and parts, 80% of its trade in machinery and 
equipment, 35% in forest products, and 72% in petroleum products. 
Trucks haul more high value-added manufactured goods and finished 
products than other freight transportation modes.  Since 1991, 
trans-border truck movements have been growing at 9% per year.  The 
commercial trucking industry in Ontario employs over 200,000 people 
directly and is indirectly responsible for another 15,000 jobs in 
related businesses. 
 
----------------------- 
Export Volume Decreases 
----------------------- 
 
4. (U) Reduced export volumes (not necessarily reduced total value) 
cut profits for the Canadian trucking industry.  In early 2008 
Canadian Trucking Alliance (CTA) Vice President, Graham Cooper, 
complained to a federal Commons Standing Committee on Industry, 
Science, and Technology that Canada's total exports to the U.S. 
declined by 3.8% and imports by 1.9% from November 2006 to November 
2007.  However, U.S. Bureau of Transportation statistics show that 
Canada surface transportation trade (truck, rail, and pipeline) 
totaled US$511 billion in 2007, up 4.6% compared to 2006.  The value 
of imports carried by truck was 0.4% higher in 2007 than 2006 while 
the value of exports carried by truck was 6.1% higher.  The value of 
goods transported by trucks may be up but the number of cross-border 
truck trips between Ontario and the U.S. fell for the third straight 
year in 2007 to 8,049,136, its lowest point since 1998, according to 
the Ontario Bridge and Tunnel Operator's Association (OBTOA). 
 
------------------------ 
Operating Costs Increase 
------------------------ 
 
5. (SBU) Diesel fuel represents the second largest component of the 
trucking industry's cost base, next to labor.  The average retail 
price of diesel fuel in Canada has risen from 76 cents per liter in 
2004 to $1.20 on March 10, 2008, severely cutting into industry 
profit margins.  CTA VP Cooper told Parliament, "While motor 
carriers have been able to pass some of this increase on to their 
customers through fuel surcharges, current business conditions in 
the industry make this increasingly difficult to accomplish."  Since 
the mid-1980s Canada's federal government has collected a 4 cent 
excise tax on the 16 billion liters consumed annually in Canada for 
road use.  The CTA is lobbying the federal government to abolish the 
excise tax surcharge on diesel fuel, but prospects for this seem 
slim. 
 
6. (U) Insurance premiums also have risen sharply since 2001, in 
part because fewer companies are offering truck insurance.  Insurers 
have justified significant premium price hikes by citing increased 
environmental and counterterrorism concerns though trucking 
companies counter that they have made significant investments in 
security, training, and safety to protect their people and assets. 
 
 
--------------------------------------------- ---------- 
Canadian Trucking Industry Facing Labor Shortage Crisis 
--------------------------------------------- ---------- 
 
 
TORONTO 00000073  002 OF 003 
 
 
7. (U) Canadian Trucking Human Resources Council (CTHRC) studies 
identify a growing shortage of qualified commercial truck drivers 
across Canada.  The studies indicate that Canadian fleets lose 22.1% 
of their drivers each year.  In recent years, trucking companies 
have been unable to fill about 12% (about 12,000 drivers) of the 
industry's job openings.  Almost half of the fleet operators that 
answered the 2006 CTHRC survey admitted they had idled equipment due 
to a shortage of personnel in the previous six months. 
 
8. (U) The labor shortage that is plaguing the Canadian trucking 
industry is exacerbated by the aging of its workforce.  According to 
Statistics Canada, in 2004, the average age of wage-earning truckers 
was 42; their self-employed counterparts were on average 45 years 
old.  Over the past decade, some transport fleets have started 
actively recruiting immigrants to replace their aging truck drivers. 
 The Statistics Canada 2001 census showed that about 33% of truck 
drivers had resided in Canada for less than 10 years in 2001, 
compared with 19% in 1991.  It is not easy for many of these "new 
Canadians" to comply with the strict requirements of the post-9/11 
U.S. border security programs (i.e. FAST). 
 
9. (SBU) ConGen Toronto issued approximately 1,000 B1/B2 visas to 
such truck drivers from March 1, 2007 to March 1, 2008.  India was 
the country of origin for nearly half the drivers, and a large 
proportion of these Indian drivers were Sikh.  Toronto also issued a 
significant number of visas to Eastern European drivers, 
particularly immigrants from Romania, Ukraine, Poland, and Russia. 
In addition, Toronto issued visas to a number of drivers from 
Pakistan, Colombia, and China.  We have observed that many of 
Ontario's immigrant truck drivers actually have advanced degrees 
from their home countries, but have been unable to secure the 
accreditation needed for them to work in their professions. 
 
--------------------------------------------- --------- 
Truckers Claim Border Security Programs Increase Costs 
--------------------------------------------- --------- 
 
10. (U) Canadian and U.S. truckers participate in several U.S. 
government "trusted shipper" programs that are designed to 
facilitate and speed cross-border trade from well-known and trusted 
shippers while improving U.S. border security.  CTA representatives 
claim that post-9/11 land transportation security programs are 
significantly increasing costs for the trucking industry. 
 
11. (U) The Customs-Trade Partnership Against Terrorism (C-TPAT) is 
the largest government-private sector partnership to emerge after 
the 9/11 terrorist attacks on the U.S.  C-TPAT builds cooperative 
relationships with the owners of the supply chain:  importers, 
carriers, brokers, warehouse operators, and manufacturers.  The 
program was launched in November 2001 with just seven companies, but 
now boasts 1,622 C-TPAT certified Canadian truck companies. 
 
12. (U) C-TPAT is a fundamental pre-requisite for participation in 
the FAST (Free and Secure Trade) program for trusted drivers, 
carriers, and importers.  U.S. Customs and Border Patrol (CBP) 
operates the program for truck companies transporting North American 
trade between the three NAFTA countries through land ports of entry. 
 Participants in FAST have access to dedicated lanes at border 
crossings as well as less lengthy inspection clearance times at 
ports of entry.  As of September 2007, more than 87,000 North 
American truck drivers are enrolled in the program.  Truckers 
enrolled in the FAST program are supposed to be sped through 
crossings, however, Ken Oplinger, president of the 
Bellingham-Whatcom Chamber of Commerce in Washington state, 
complained last fall that 12% are facing secondary screenings. 
 
13. (U) The Advanced Electronic Presentation of Cargo Information 
(e-manifest) requires trucks to provide manifest information at 
least one hour before they arrive at the U.S. border except for some 
very specific cargo release processes.  Through the PAPS 
(Selectivity Pre-Arrival Processing System), U.S. CBP utilizes 
barcode technology to expedite the release of trusted commercial 
shipments.  Importers or shippers electronically transmit entry 
summary data to CBP, directly or via customs brokers.  Truckers note 
that customs brokers can face delays of one to two hours to process 
the invoice with CBP, and that many trucks must delay proceeding to 
the border until the drivers receive notice from the broker or truck 
dispatcher that CBP has received the invoice information and that 
the load is in compliance.  In a statement released in November of 
2007, OTA President David Bradley estimated that border delays are 
costing the Canadian trucking industry C$500 million to C$1 billion 
per year. 
 
14. (U) The Public Health Security and Bio-Terrorism Preparedness 
and Response Act of 2002 (Bio-Terrorism Act) requires that the U.S. 
Food and Drug Administration (FDA) receive two hours prior notice 
for food imported or offered for import into the United States.  In 
addition, in 2007, CBP began inspecting all food shipments entering 
 
TORONTO 00000073  003 OF 003 
 
 
the U.S. from Canada and began charging every truck entering the 
U.S. a cost-recovery fee. 
 
15. (U) Trucking companies note a number of increased operating 
costs, including the cost to obtain a FAST card, the cost of 
training drivers about border procedures, and bonuses to induce 
drivers to cross the border.  Trucking companies have purchased new 
security systems such as closed circuit cameras, fencing, gates, 
lighting, and employee identification cards in order to become 
C-TPAT compliant and then FAST approved.  Carriers have also 
invested in programming and hardware to comply with the PAPS 
program.  Trucking companies complain that border security programs, 
particularly PAPS, also have raised administrative costs by 
increasing clerical workload, increasing the time needed to work 
with customs brokers, increasing the idle time for drivers, 
requiring companies to acquire a Standard Alpha Carrier Code (SCAC) 
(a unique two-to-four-letter code used to identify transportation 
companies), requiring companies to develop PAPS barcodes for their 
shipments, and requiring the purchase of additional office equipment 
to comply with the new programs. 
 
--------------------------------------------- -- 
Canadian Trucking Companies Are Less Profitable 
--------------------------------------------- -- 
 
16. (U) The stock prices of Canada's top publicly traded 
transportation companies reflect the challenges facing the Canadian 
trucking industry.  The stock price of TransForce, one of Canada's 
foremost trucking firms, plummeted 65% between April 2006 (C$19.00) 
and early March 2008 (C$6.61).  The stock value of Contrans, another 
publicly traded income fund, and one of Canada's largest trucking 
companies, hovered around C$12.00 in April 2006, but declined 25% to 
C$8.85 as of March 10, 2008. 
 
17. (U) In contrast, the Canadian rail industry is profitable 
because rail is on average three or more times more fuel efficient 
than trucks, and demand is booming for heavier commodities which are 
generally shipped by rail rather than truck.  In addition, we have 
heard that some companies have begun shipping more goods via rail 
and fewer by truck in recent years.  The Canadian Pacific Railway's 
(CPR) stock value has increased 14% from April 2006 (C$60.00) to 
March 6, 2008 (C$68.63). 
 
18. (SBU) COMMENT:  We can do little but sympathize with these 
manifestations of economic reality, while noting that border 
infrastructure operators and the managers of U.S. ports of entry 
work hard to ensure that these voluntary programs facilitate trade 
while allowing CBP officers to more effectively target their 
inspection efforts to improve border security.  We need to 
effectively demonstrate and communicate the real value of the 
C-TPAT, FAST, and PAPS programs to the companies that have invested 
significant resources to participate in them.  In our dialogue with 
Canadian exporters and shippers, we will continue to urge them to 
offer specific suggestions about how we could improve these trusted 
shipper programs.  END COMMENT. 
 
NAY 
 
 
 
 
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