July 2, 2014

Program to speed intermodal goods clearance at Mexican border gaining traction, KCS says

Joint initiative is reducing dwell times in Mexico, rail executive says.

By Mark B. Solomon

An effort by four prominent companies to shrink transit times on U.S.-Mexico intermodal rail service by streamlining customs clearance procedures at the border appears to be paying off, according to a top executive at Kansas City Southern Railway (KCS), which launched the initiative some eight months ago.

The group—which includes KCS, consumer products giant Whirlpool Corp., trucker and third-party logistics provider Schneider National Inc., and freight forwarder and customs broker Expeditors—has been working on a pilot program to drive down delivery times on Whirlpool shipments moving from factories in Mexico to end points in the United States.

KCS initiated the program after receiving complaints from various customers about bottlenecks in Mexico that extended delivery times beyond what was deemed acceptable for intermodal service. For example, a KCS analysis of Whirlpool's supply chain found that it took 12 to 15 days to move shipments from the company's Mexican factories to its U.S. destinations.

In a bid to identify the problems, KCS created a pilot program with Benton Harbor, Mich.-based Whirlpool as the test customer. KCS asked Whirlpool to participate because of its strong manufacturing and distribution presence in Mexico and its reputation for collaborating with partners to improve supply chain performance in the corridor, according to Patrick Ottensmeyer, chief marketing officer for Kansas City, Mo.-based KCS.

Once Whirlpool signed on, Schneider and Expeditors followed suit. Green Bay, Wis.-based Schneider is Whirlpool's trucker in the market. Seattle-based Expeditors is its customs broker.

One of the program's key objectives was to cut Whirlpool's end-to-end delivery times to between 8 and 10 days, which could potentially save the company millions of dollars in inventory carrying costs, according to Ottensmeyer.

KCS analyzed the operations of multiple terminals, customs brokers, and intermodal marketing companies (IMCs) that sell intermodal services on behalf of the railroads. KCS also conducted a thorough review of its own processes. It discovered that it was partially responsible for the tie-ups. A containerized Whirlpool shipment arriving at a KCS ramp would typically spend up to 90 hours at a terminal from the time it entered the gate until the time the train pulled out. KCS set about reducing that dwell time to 24 hours, Ottensmeyer said.

Another chokepoint revolved around the nonuniform schedules of Mexican Customs. Some locations were open around-the-clock, while others were not. Some kept evening and Saturday hours, while others did not. Customs closures would present problems for KCS if a truck entered a terminal with cargo that was ready to be processed, according to Ottensmeyer.

In addition, the flow of containers and paperwork were often out of sync. Containers would enter KCS' terminal, where they would be placed in a bonded yard awaiting processing and clearance. However, Mexican Customs is set up to receive documentation from brokers in two daily batches. This meant containers could wait for hours before the documentation would reach Customs for processing. To speed up the process, KCS, brokers, and Customs agreed to transmit and accept information in smaller batches and with more frequency. KCS also digitized its manual data entry practices, a step that reduced the potential for human error, Ottensmeyer said.

KCS has significantly cut dwell times since the steps were introduced, Ottensmeyer said. When the pilot began, KCS achieved a 24-hour turnaround on Whirlpool's containers about 37 percent of the time, Ottensmeyer said. Today, it is over 50 percent, he said.

Discussions are under way to automate the customs approval process itself; this includes the potential for digitizing a long-standing tradition of requiring that customs officials stamp hard copies of export documentation before the goods can be released. Ottensmeyer said KCS has "developed a productive dialogue" with Mexican customs officials about the possibility for increased automation. "They are receptive to modernizing these processes to facilitate improved flow of goods across the border," he said.

The Holy Grail for speeding up transit times, according to Ottensmeyer, would be for customs brokers to provide truckers with the "pedimento"—the Mexican export document that controls and verifies customs clearance—before the driver reaches the ramp with the load. That would effectively provide release authorization at the time of arrival at the rail terminal. Currently, the paperwork process doesn't begin until truck, driver, and container arrive at the ramp. KCS operates three dedicated ramps in Mexico and uses other public ramps throughout the country.

If intermodal can remove the bottlenecks that slow transit times, it could capitalize on shippers' concerns about border congestion and security on the roads and make meaningful inroads into the trucking industry's dominance of cross-border trade. Through April, the last month public data was available, trucks carried 67.8 percent of the $44.4 billion worth of freight to and from Mexico, followed by rail at 13.4 percent, according to the Department of Transportation's Bureau of Transportation Statistics.

Intermodal advocates argue that its users avoid truck traffic tie-ups at the border because shipments are often cleared in-bond at interior locations. In addition, intermodal theft is virtually nonexistent because the doors of the lower container on a double-stack train can't be opened while the container is in the well car, and the upper container is more than 15 feet off the ground.

Ottensmeyer estimates that KCS has a less than 3-percent share of the 3 million trucks serving the U.S.-Mexican market each year that either could be converted to intermodal service or would have the potential for conversion.

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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