1. U.S. - Canada Border Economic Costs A Study Conducted by Dr. John Taylor and Associates for FHWA, MDOT and NYDOT June 2003

2. Introduction Report documents border and related costs Report documents border and related costs Examines levels of trade and traffic over time Examines levels of trade and traffic over time Reviews causes of long border crossing transit times and uncertainty Reviews causes of long border crossing transit times and uncertainty Reviews possible short and long term solutions Reviews possible short and long term solutions Evaluates “external perimeter” strategy in comparison to further tightening the border Evaluates “external perimeter” strategy in comparison to further tightening the border Purpose is to provide a factual foundation for cost-benefit analysis of various options Purpose is to provide a factual foundation for cost-benefit analysis of various options

3. Methodology Secondary literature review Secondary literature review 750 articles750 articles 45 border reports45 border reports Multiple site visits to seven crossings Multiple site visits to seven crossings Traffic data from 1984 and monthly data pre to post 9/11 Traffic data from 1984 and monthly data pre to post 9/11 Primary inspection transit time (backup) data from Canada Customs for both directions Primary inspection transit time (backup) data from Canada Customs for both directions 173 personal interviews of key organizations/persons 173 personal interviews of key organizations/persons Estimation of border related costs by impact category and in total Estimation of border related costs by impact category and in total Analysis of border management options Analysis of border management options

4. Key Findings Total border related cost impacts are estimated at US$10.3 billion at the mid- range, or 2.70% of total 2001 U.S.- Canada trade in goods of US$382.0 billion. Total border related cost impacts are estimated at US$10.3 billion at the mid- range, or 2.70% of total 2001 U.S.- Canada trade in goods of US$382.0 billion. The total border costs related to trucking are estimated at US$9.45 billion at the midrange, or some 4.02% of total truck trade The total border costs related to trucking are estimated at US$9.45 billion at the midrange, or some 4.02% of total truck trade

5. Findings Transit time and uncertainty costs, specifically, total an estimated US$4.01 billion. Transit time and uncertainty costs, specifically, total an estimated US$4.01 billion.

6. Findings General border management related costs for federal staff, manufacturers and carriers totaled an estimated US$6.28 billion. General border management related costs for federal staff, manufacturers and carriers totaled an estimated US$6.28 billion.

7. Type of Cost MinimumMidrangeMaximum General Border Costs Carrier Related Carrier Related General Border Administration General Border Administration100.0200.0250.0 Cabotage Cabotage100.0150.0333.3 Carrier Subtotal Carrier Subtotal200.0350.0583.3 Manufacturer Related Manufacturer Related Brokerage Costs Brokerage Costs372.8462.9552.9 Duties, Border Fines, and Fees Duties, Border Fines, and Fees1337.61605.11872.3 Customs Administration Customs Administration2630.03290.03950.0 Manufacturer Subtotal Manufacturer Subtotal4340.45358.06375.2 Federal Inspection Services Staff Federal Inspection Services Staff452.9571.5960.9 General Border Subtotal General Border Subtotal4993.36279.57919.4 Transit Time and Uncertainty Subtotal Transit Time and Uncertainty Subtotal2523.54014.45269.7 Total U.S.-Canada Border Costs Total U.S.-Canada Border Costs7516.810293.913189.1 General Border Costs and Grand Total (Millions of Annual US$)

8. Transit Time and Uncertainty Related Impact Summary (Millions of Annual US$) Type of Cost MinimumMidrangeMaximum Transit Time/Uncertainty Costs Carrier Related Carrier Related Primary Inspection Transit Time Primary Inspection Transit Time275.3324.2351.8 Secondary Yard Processing Secondary Yard Processing602.5755.4908.3 Excess Plan Time Excess Plan Time113.7416.4515.7 Reduced Cycles/Other Reduced Cycles/Other65.8120.7197.4 Driver Documentation/Fax Time Driver Documentation/Fax Time133.5250.7400.9 Carrier Subtotal Carrier Subtotal1190.81867.42374.1 Manufacturer Related Manufacturer Related Manufacturer Sourcing Benefits Manufacturer Sourcing Benefits1007.01530.02000.0 Extra Inventory Carrying Cost Extra Inventory Carrying Cost229.0458.0686.0 Manufacturer Subtotal Manufacturer Subtotal1236.01988.02686.0 Personal Traveler Personal Traveler96.7159.0209.6 Transit Time/Uncertainty Subtotal Transit Time/Uncertainty Subtotal2523.54014.45269.7

9. Truck Primary Transit and Secondary Processing Cost Impacts (Millions of US$) Table 4 Category/Assumpti on MinimumMidrangeMaximum Entering USA Primary Primary Secondary Secondary Total Total$213.4 392.5 392.5 605.9 605.9$256.1 483.4 483.4 739.5 739.5$277.5 574.4 574.4 851.9 851.9 Entering Canada Primary Primary Secondary Secondary Total Total 61.9 61.9210.0271.9 68.1 68.1272.0340.1 74.3 74.3333.9408.2 Total U.S.-Canada Primary Primary Secondary Secondary Total Total275.3602.5877.8 324.2 324.2 755.4 755.41079.6 351.8 351.8 908.3 908.31260.1

10. Primary Inspection Transit Time Costs A key cost category relates to primary inspection transit time (backup time) costs A key cost category relates to primary inspection transit time (backup time) costs Costs were estimated using transit time data collected by Canada Customs. Sample of daily data from May 1 to August 31, 2002 Costs were estimated using transit time data collected by Canada Customs. Sample of daily data from May 1 to August 31, 2002 Average backup times were used as a sample and applied to annual traffic to arrive at total backup hours Average backup times were used as a sample and applied to annual traffic to arrive at total backup hours Using a cost of $150/hour total backup, costs were estimated Using a cost of $150/hour total backup, costs were estimated