CANADA-UNITED STATES LAW INSTITUTE ANNUAL CONFERENCE 2008 THE WORLD’S LONGEST UNDEFENDED BORDER: GATEWAY OR CHECKPOINT? Paul Vandevert International Trade Attorney Office of General Counsel The Canada-US Supply Chain in the Era of Global Economic Competitiveness

April 17, 2008 Overview: Ford & the Auto Industry Depend on an Open Border Between US & Canada  Brief History of Ford in US & Canada  History of Free Trade between US & Canada  Factual Profile of Ford as Trader in US & Canada  Trade & Security  Security Measures: Which Are Most Effective?

April 17, 2008 Ford Motor Company: A Brief History Ford Motor Company founded in the United States in 1903; began business in Canada in 1904 Today Ford has four recognized brands in addition to “Blue Oval” Manufactures vehicles on six continents and all major automotive markets Ford brands family distributes vehicles in over 100 countries.

April 17, 2008 Free Trade Between Canada & the US The Auto Industry Pioneered and Enjoys Benefits of Free Trade between Canada and the US  Automotive Products Trade Agreement of 1965 (APTA)  Conditional free trade for automotive industry imports to be used for production of new motor vehicles.  Recognized close integration of supply base and OEM customers in Canada and the US and facilitated growth in automotive industry  Canada-US Free Trade Agreement (1989)  Expanded free trade from automotive sector to all sectors  Free trade in qualifying goods immediately for auto sector – conditions dependent on use eliminated  All US and Canadian qualifying goods duty free in 1998  North American Free Trade Agreement (NAFTA 1994)  Expanded free trade to Mexico  Recognized and facilitated complete integration of auto industry in North America as a single market  Duty free trade for all qualifying goods in all 3 countries in 2004

April 17, 2008 Ford as Trader in Canada & US  Ford makes over 200,000 entries a year into US  Ranks in top 5 US importers by entry volume  Over 163,000 entries from Canada  Over 156,000 entries through two US ports: Detroit & Port Huron  20 Canadian suppliers account for over 92,000 of Ford’s entries  Ford’s total entered value per year more than US$15 Billion  Ranks in top 5 US importers by entered value  Nearly US$8 Billion of entered value comes from Canada

April 17, 2008 Of Trade and Security TRADE  In all of North America, Ford saves* over $1 Billion in duties every year under NAFTA * Volume of trade would not exist without NAFTA  Effective duty rate for Ford on goods from Canada is 0.1%,  Ford effectively claims duty free imports under NAFTA on over 99% of all entries made SECURITY  Ford was one of the original 7 “charter” members of C-TPAT  Signed MOU with US Customs in February 2002  Recently revalidated as a Tier III importer in C-TPAT  Ford carriers participate in C-TPAT & FAST  Through Industry trade groups Ford has supported SPP and other North American security initiatives

April 17, 2008 Security Measures: Risk Assessed v Non-Discriminatory? Risk Based Assessments  In risk based assessments, Customs will make security threat determination based on level of security risk posed by shipper, importer or shipment  C-TPAT lays the foundation for risk based assessment of security threat  In C-TPAT, importers such as Ford provide Customs with data and information on their entire supply chain, which Customs validates.  Information provided covers importer, suppliers, carriers and other supply chain service providers who may handle shipment (freight forwarders, consolidators, Customs brokers)  Based on validated data from C-TPAT participants, Customs could systemically rate security risk of inbound shipments and segregate low risk shipments, leaving higher risk shipments for additional scrutiny

April 17, 2008 Security Measures: Risk Assessed v Non-Discriminatory? Non-Discriminatory Assessments  Non-discriminatory security assessment methods treat all importers, shippers and shipments the same  Proposed Importer Security Filing rule (aka “10+2”) is non- discriminatory security assessment method.  All importers, regardless of risk posed, required to file same amount of data with CBP 24-hours in advance of loading of shipment.  ISF threatens to close border without adequate evidence that security will be enhanced  While rule would initially apply only to ocean shipments, CBP has already announced that ISF rule will be expanded very soon to all modes of border crossing.  Significant number of Ford’s suppliers are within 30 minutes of the border