Tighter security In the days following the jetliner terror attacks, the normally smooth flow of trade was practically paralyzed. Now that global commerce is back near normal, businesses have a new worry.
slows global trade
So far, Honolulu's Foreign Trade
Zone has not seen a slowdown
in the movement of goodsAssociated Press
With wartime-type security at American points of entry still in place, some businesses are concerned that protracted anti-terrorism efforts will complicate -- and slow -- the movement of goods that anchor the world economy.
"At this point, companies are reluctant to say much about this because they don't want to seem unpatriotic, but privately they are concerned," said Roger Majak, a former assistant U.S. commerce secretary under the Clinton administration.
"Ultimately it will affect their bottom lines," said Majak, an adviser at Open Harbor, which helps companies automate import-export procedures.
The cost could amount to one-half of 1 percent of U.S. gross domestic product -- the total output of goods and services, estimates Peter Morici, a senior fellow at the Economic Strategy Institute in Washington D.C. That would be about $51 billion per year.
Whether the reason is stricter scrutiny, fewer flights, costlier logistics, or companies acting more conservatively amid uncertainty, "the world is slowing down," Morici said. "And the government seems to be instituting more and more (security) measures."
The U.S. Customs Service is now inspecting more goods than ever before. Cargo allowed on passenger flights is being subjected to closer scrutiny. The U.S. Coast Guard now requires ocean shippers to give detailed information about crew members -- and not just the cargo.
"We are going a lot further today in examinations and inspections because of Alert Level One," Jim Michie, a Customs Service spokesman said. The Customs commissioner, Robert Bonner, says the highest level of security will remain into the "foreseeable future."
Some inspections "won't take very long at all, and some may go on for days, depending on the cargo," said Michie, adding that "our primary mission is to make sure people are safe and to protect our borders from any illegal traffic and traffic contributing to terrorism."
At Honolulu's Foreign Trade Zone, acting Administrator Mark Anderson has yet to notice a slowdown in the movement of goods.
"Right now our procedures haven't changed. We believe right now we have a normal level of activity," he said.
But if the rules change considerably, Anderson concedes all that could change.
That's something shippers are already concerned about, Anderson said.
"We know there is anxiety among our foreign traders and it will be more costly when cargo is waiting," he said.
Michael Bowers, president of the Hawaii Customs Brokers Association, agrees with Anderson's assessment.
Bowers and five other brokerage companies in Hawaii handle much of the paperwork and processing for individuals and companies that import goods into Hawaii.
"Things are continuing pretty much as normal as far as getting through customs," he said.
But with many ships already on the water at the time of the Sept. 11 tragedy, Bowers said it is too early to tell what impact any new restrictions on ocean freight might have.
For Western Digital Corp., a California-based maker of computer disk drives, tighter security means the days when Customs officials allowed a "paperless release" of its trans-Pacific shipments are over.
The electronic review process, reserved for certain low-risk importers, had meant that Western Digital's Malaysian-made components were usually released from American airport freight stations with little or no delay.
The Customs Service has now scaled back the paperless initiative, and Western Digital is finding that agents are carefully examining each shipment's documentation, stretching a process that used to take less than a minute up to two days, said David Vellema, the company's import-export manager.
The delays put one customer at risk of a plant shutdown, so Western Digital had to send a customs broker to the airport to hand deliver a special letter requesting a quicker release.
Western Digital says the new logistics haven't cost more money yet -- only more work, headaches and a great deal of uncertainty.
Advanced Micro Devices Inc. a chip-making company based in Sunnyvale, Calif., ships its goods between factories in Dresden, Germany and Austin, Texas and then to plants in Asia for testing and assembly.
Under the tightened security, the company has had to switch from using passenger flights that carry cargo to air freight carriers, which are more expensive, less frequent and require more lead time.
AMD chips were stuck in Austin for a few days after the Sept. 11 terror attacks -- part of a massive logjam of cargo that also kept truckloads of goods piled behind borders and prompted automakers including Ford Motor Co. to halt assembly lines.
"It was a wake-up call," said AMD spokesman John Greenagel.
Some manufacturers are re-evaluating their "just-in-time" manufacturing models, in which parts are delivered to plants as they are needed, getting onto assembly lines usually within hours of arrival. A timeworn hallmark of globalized trade, the method minimizes warehousing costs and inventory problems.
Fremont, Calif.-based New United Motor Manufacturing Inc., which makes Toyota and GM models, was spared from a shutdown after the attacks, but is now guarding against the risk.
The plant, which relies on parts shipped by rail, truck, air and sea from Canada, Mexico and Japan, asked some of its North American suppliers last week to begin holding 10 days worth of inventory.
At U.S. ports, shipping companies and port officials say Customs and Coast Guard inspectors have worked hard to keep the delays minimal -- usually under an hour -- even with the more intense scrutiny both onboard and ashore.
At several of the nation's larger ports, including New York and San Francisco, the Coast Guard is boarding each ship, said Coast Guard spokesman Dan Dewell.
Freighters can make up for lost time by speeding up at sea, but traveling faster burns more fuel, said Dan Westerlin, a Port of Oakland spokesman.
Industry observers say the security-related costs will add up and potentially slow down the international flow of goods at a time when economies are weak worldwide. And while industry groups support the government's prerogative to protect America, some are also preparing for a renewed struggle in the long-standing debate to balance national security against trade interests.
"We understand the need for security at the border, but it's important for plants to continue their business, too," said Frank Vargo, vice president of international economic policy for the National Association of Manufacturers.
Though the full ramifications of the heightened security are not known, experts predict a slowing in global trade expansion after decades of rapid growth that helped spur the so-called Asian tiger economies.
Star-Bulletin reporter Lyn Danninger contributed to this story.