FREIGHT FLOW STUDY. Chapter One. 1.0 Introduction. 1.5 Intermodal: Ports and Rail. 1.6 Trends & Projections. 1.1 International Trade/Shipping Process

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1 Chapter One FREIGHT FLOW STUDY 1.0 Introduction 1.1 International Trade/Shipping Process 1.2 Survey Information 1.3 Regional Trade 1.5 Intermodal: Ports and Rail 1.6 Trends & Projections 1.7 U.S. Counties by BEA 1.8 United States Quadrants 1.4 Air Cargo Kansas City - International Trade Processing Center Study 1

2 1.0 Introduction The objective of this component of the study is to present data about the international freight flows in the Kansas City Area. For the purposes of this study the Kansas City Area has multiple definitions depending on the data source. A catchment area was established that comprised a 250 mile radius around Kansas City or a one-day drive for a single-driver, commercial vehicle. Major commercial centers within the 250 mile radius were not included, such as St. Louis, Missouri. International freight flow is defined as imports and exports, to and from Canada and Mexico. For this study, the transportation infrastructure includes the interstate system, railroads, airports, and waterways serving the Kansas City area. As depicted in Figure 1-1, the interstate system includes the NAFTA corridor (I-35, I-29) and I-70. This study reviewed all modes of transport including surface (trucks and rail), air, and water (barge). Figure 1-1 The NAFTA Corridor/ I-35 MN WI MI IA 80 IN 70 IL KS KY MO 35 TN 40 OK AR MS LA TX Kansas City - International Trade Processing Center Study 2

3 This report will trace the international origins and destinations of cargo shipments, identify the types of commodities, and measure the value and volume of trade. Furthermore, the report will track the primary transportation modes and corridors, and identify the land border crossings, seaports, and international airports that serve as conduits for transportation of these shipments. The specific goals of this report are to: Assess international trade flows and commodities through the Kansas City area and the adjacent Mid-Western Region; Define principal transportation modes, ports, and corridors providing international cargo service to/from Kansas City; Identify commodities, trade corridors and transportation modes that provide potential for increasing international trade flows in Kansas City; and, Estimate potential economic benefits resulting from trade flow projections. This report will first present an analysis of the database information provided by Transearch for commercial vehicles, rail, air, and barge. The second section provides a detailed examination of air cargo, followed by a seaport perspective which provides a containerized cargo analysis for inland waterways and transport. Next, the survey information will be presented followed by intermodal information from Kansas City railroads. Finally, a summary will draw from the various sources of information to define the types and destination of cargo and to lend additional insight into issues surrounding the potential benefits of a trade processing center. 1.1 International Trade/Shipping Process 'DWD &ROOHFWLRQ Two primary sources provided the data used in this freight flow study. A commercial multimodal freight flow data base known as Transearch provided data in a format and quantity tailored to this project. With specific parameters determined by the objectives of this project, the data base was tailored to provide the required information about cargo flows. Transearch contains data on commercial vehicle (truck), rail, air, and water transport. Kansas City - International Trade Processing Center Study 3

4 The second data source was derived from the surveys administered by the ETC institute. ETC sent a total of 3,200 international trade surveys to three separate groups identified as the freight community, small businesses and large businesses. The respondents could mail, fax, or telephone their thoughts, concerns and other pertinent information regarding international trade. A preliminary Stakeholders Interview Summary Report (July 24, 1998) was completed to formulate the surveys for the three groups. The surveys of businesses and other organizations were used to gather statistically valid information from entities that would be affected and/or involved in the development of a major trade processing center in Kansas City. &RPPRGLW\\ )ORZV To determine the commodity flows of import and export cargo, a commercial database was procured that measures international trade in the specific project catchment area. The Transearch database was purchased through Reebie and Associates, Stamford, Connecticut. The Transearch database blends information from multiple individual data sources into a single form to present collective international freight information. Transearch uses the most current available information which - for this analysis - comprised the 1996 calendar year. Primary traffic flow sources include: Transearch Motor Carrier Data Exchange Program Annual Rail Carload Waybill Sample Annual Energy Department Coal Movement Statistics Annual Agriculture Department Produce Movement Data Annual Corps of Engineers Waterborne Commerce Statistics Census of Transportation Commodity Flow Survey Import/ Export Trade Statistics and Inland Traffic Survey The data is supplemented with information from the following sources: Annual Survey of Manufacturers Annual Bureau of Mines Commodity Reports Railroad Freight Commodity Statistics Kansas City - International Trade Processing Center Study 4

5 Federal Reserve Board Industrial Production Indices Proprietary Data From Participating Firms State Economic Output by Industry Trade Associations Production and Traffic Data Annual County Business Patterns Inter-Industry Trade Patterns Annual County Population Estimates The cargo is categorized using the federal government s classification system of Standard Industrial Classification (SIC) Codes. For this study, the SIC Codes were analyzed at the two digit level. A listing of SIC Codes is contained in Section 1.6. The first analysis presents data that was specifically queried for each catchment area. Using the national system of Business Economic Areas (BEAs) to define the catchment area, information was collected for specific modes on international trade. The following zones define the catchment area (the numeric code being the BEA number): Kansas City, MO (105) Topeka, KS (141) Des Moines, IA (104) Columbia, MO (106) Wichita, KS (139) Salina, KS (140) Lincoln, NE (142) Springfield, MO (108) Grand Island, NE (144) Omaha, NE (143) Figure 1-2 graphically shows the BEAs. Section 1.7 lists all of the counties that are contained in each of the numeric BEAs. Kansas City - International Trade Processing Center Study 5

6 Figure 1-2 Business Economic Areas ,PSRUWV DQG ([SRUWVWR W &DQDGD E\ 7UDQVSRUWDWLRQ 0RGH For rail, the largest volume (by weight) of exported cargo went to Ontario and Quebec while the largest volume of imported cargo came from British Columbia, Alberta, Saskatchewan, and Manitoba. For export and for import, the SIC commodities having the greatest volumes are shown below. Kansas City - International Trade Processing Center Study 6

7 Exports to Canada Imports from Canada By Rail TOP 5 Commodity Types for this Cargo Flow Are: By Rail TOP 5 Commodity Types for this Cargo Flow Are: Petroleum or Coal Products Transportation Equipment Waste or Scrap Material Food or Kindred Products Lumber or Wood Products Lumber or Wood Products Farm Products Chemicals or Allied Products Non-Metallic Minerals Pulp, Paper or Allied Products For cargo exported by commercial vehicles (trucks), the largest volume (by weight) was exported to Ontario and Quebec. These are the same two leading export destinations previously identified in the rail analysis. The largest volume of cargo imported by truck was imported from Ontario, Manitoba, British Columbia and Quebec. With the exception of Quebec, each of these provinces also placed among the leading origins for rail imports. For the four Western Canadian Provinces, a large portion of this truck traffic would travel to Kansas City along I-29 from the north and I-70 from the west. The imports from Ontario and Quebec would travel to Kansas City via I-94/ I-35. Import and export commodities are listed below: Exports to Canada Imports from Canada By Truck TOP 5 Commodity Types for this Cargo Flow Are: By Truck TOP 5 Commodity Types for this Cargo Flow Are: Transportation Equipment Chemicals or Allied Equipment Non-Metallic Minerals Food or Kindred Products Metal Products Transportation Equipment Lumber or Wood Products Pulp, Paper or Allied Products Farm Products Food or Kindred Products By air, the largest volume (by weight) of cargo exports were shipped to Ontario, Quebec, and Alberta in that order. For imports, the largest air cargo volumes came from Quebec, Kansas City - International Trade Processing Center Study 7

8 Ontario, and British Columbia in that order. Given that Air Canada s twice-daily service between the Kansas City International (KCI) Airport and Toronto, Ontario is KCI s only scheduled international service, the preponderance of Eastern Canadian provinces on this list is not surprising. The principal commodities transported by air include: Exports to Canada Imports from Canada By Air TOP 5 Commodity Types for this Cargo Flow Are: By Air TOP 5 Commodity Types for this Cargo Flow Are: Electrical Equipment Miscellaneous Manufacturing Products Waste or Scrap Materials Fabricated Metal Products Machinery Transportation Equipment Electrical Equipment Transportation Equipment Fabricated Metal Products Machinery An analysis of waterborne commerce with Canada reveals that both the largest import and export volumes (by weight) of trade occurred with Ontario. Waterborne freight transportation on the Missouri River is highly seasonal, usually occurring from late March through November. The principal commodities transported by water include: Exports to Canada Imports from Canada By Water TOP 5 Commodity Types for this Cargo Flow Are: By Water TOP 5 Commodity Types for this Cargo Flow Are: Petroleum or Coal Products Primary Metal Products Coal Chemicals or Allied Products Farm Products Non-Metallic Metals Petroleum or Coal Products Lumber or Wood Products Gas Farm Products Kansas City - International Trade Processing Center Study 8

9 A closer look at the exports to Canada from the defined catchment area reveals a greater amount, by weight, of freight travels to Canada via truck than rail. This was the case for each of the top commodities except for Petroleum or Coal Products. For each BEA researched in this study the top commodity exported to Canada is listed with the percent breakdown of mode of travel and a breakdown of all freight exported by mode, truck and rail. This information is shown in Table 1-1. Table 1-1 Exports to Canada by BEA to all of Canada Top Commodity % % All Exports to: (by weight) by truck by rail % by truck % by rail Des Moines, IA Food or Kindred Product Kansas City, MO Transportation Equipment Columbia, MO Clay, Concrete, Glass or Stone Wichita, KS Petroleum or Coal Products Salina, KS Nonmetallic Minerals Topeka, KS Rubber or Misc. Plastics Lincoln, NE Food or Kindred Product Omaha, NE Food or Kindred Product Grand Island, NE Food or Kindred Product Springfield, MO Transportation Equipment Another way to look at the freight being exported to Canada is to review the destination Canadian Province to find trends in certain markets, i.e. the freight that is exported to Ontario from the catchment area. Table 1-2 provides a look at the top commodity exported to each of the Canadian Provinces and the mode split for that commodity as well as all freight exported to that Province. Note that travel by water, air, and other (pipeline, etc) is included in the analysis, but not shown in the table. Kansas City - International Trade Processing Center Study 9

10 Table 1-2 )URP.DQVDV &LW\ DUHD WR HDFK 3URYLQFH Top Commodity % % All Exports to: (by weight) by truck by rail % by truck % by rail Nova Scotia Transportation Equipment Prince Edwards Island Transportation Equipment Newfoundland Fabricated Metal Products New Brunswick Food or Kindred Products Quebec Petroleum or Coal Products Ontario Transportation Equipment Manitoba Food or Kindred Products Saskatchewan Waste or Scrap Materials Alberta Food or Kindred Products British Columbia Food or Kindred Products Yukon Electrical Equipment Analysis of imports from Canada into the defined catchment area reveals that for most freight a greater percentage of cargo measured by weight, travels via truck. The table below indicates the percentage breakdown of mode of transport when comparing commercial vehicle to rail. The Lumber or Wood Product commodity shows a larger percentage imported traveled by rail. Table 1-3,PSRUWV WR WKH.DQVDV &LW\ 5HJLRQ IURP &DQDGD Top Commodity % % All Imports from: (by weight) by truck by rail % by truck % by rail Nova Scotia Nonmetallic Minerals Prince Edwards Island Farm Products New Brunswick Petroleum or Coal Products Quebec Pulp, paper or allied products Ontario Nonmetallic Minerals Manitoba Farm Products Saskatchewan Farm Products Alberta Crude petroleum or natural gas British Columbia Lumber or Wood Products Northwest Territories Lumber or Wood Products Kansas City - International Trade Processing Center Study 10

11 ,PSRUWV DQG ([SRUWVWRW 0H[LFR E\ \ 7UDQVSRUWDWLRQ 0RGH For the purpose of defining the major trading areas and corridors, Mexico s thirty-one states and one federal district were divided into three regions - a northern, southern, and middle area as shown in Table 1-4. Table 1-4 Mexican States 0H[LFDQ 6WDWHV 1RUWKHUQ 0H[LFR 0LGGOH 0H[LFR 6RXWKHUQ 0H[LFR CHIHUAHUA AGUASCALIENTES CHIAPAS BAJA CALIFORNIA NORTE COLIMA CAMPECHE BAJA CALIFORNIA SUR DISTRITO FEDERAL GUERRERO COAHUILA GUANAJUATO MORELOS DURANGO HIDALGO OAXACA NUEVO LEON JALISCO PUEBLA SINALOA MEXICO QUINTANA ROO SONORA MICHOACAN TABASCO TAMAULIPAS NAYARIT TLAXCALA QUERETARO YUCATAN SAN LUIS POTOSI VERACRUZ ZACATECAS An analysis of rail exports to Mexico reveals that the greatest volume (by weight) is transported to the northern Mexican states while the greatest volume of rail imports came from middle Mexico. The top commodities transported by rail include: Exports to Mexico Imports from Mexico By Rail TOP 5 Commodity Types for this Cargo Flow Are: By Rail TOP 5 Commodity Types for this Cargo Flow Are: Field Crops Grain Mill Products Miscellaneous Food Preparations Gravel or Sand Sugar, Beet or Cane Refined Petroleum Products Industrial Chemicals Fiber, Paper or Pulp Board Motor Vehicles/Equipment Miscellaneous Wood Products Kansas City - International Trade Processing Center Study 11

12 For both imports and exports, Middle Mexico produces the largest volume of freight transported by truck. For trucked commodities, the major trade route would be the I-35 (or NAFTA) trade corridor, crossing into the United States in Laredo, Texas. The top commodities transported by truck include: Exports to Mexico Imports from Mexico By Truck TOP 5 Commodity Types for this Cargo Flow Are: By Truck TOP 5 Commodity Types for this Cargo Flow Are: Field Crops Gravel or Sand Cut Stone or Stone Products Structural Clay Products Electrical Equipment Electrical Equipment Fiber, Paper or Pulp Board General Industrial Machinery Household or Office Furniture Fabricated Metal Products Reviewing the top commodity traveling by both truck and rail, Field Crops, Table 1-5 shows the breakdown by mode of transport comparing percent of total traveling via commercial vehicle compared to rail. The longer distances are transported via rail and those Mexican states nearer the catchment area are transported via truck. This is true for the top commodity as well as all exports. Table 1-5 Exports to Mexico (from all BEAs to Mexico) Top Commodity % % All Exports to: (by weight) by truck by rail % by truck % by rail Northern Mexico Field Crops Middle Mexico Field Crops Southern Mexico Field Crops Kansas City - International Trade Processing Center Study 12

13 A product specific trend is observed with imports to the catchment area from Mexico. Petroleum products travel via rail and electrical equipment mostly traveled via truck. Table 1-6 Imports to the Kansas City Region from Mexico Top Commodity % % All Imports from: (by weight) by truck by rail % by truck % by rail Northern Mexico Product of Petroleum Refining Middle Mexico Electrical Equipment Southern Mexico Product of Petroleum Refining ROXPH RI 7UXFNV Further analysis of the TranSearch data can detail an approximated number of commercial vehicles traveling to the Kansas City area using an analysis of the weight of goods traded divided by an average range of load per truck. Import volumes were analyzed to determine a range of number of trucks traveling to Kansas City based on the overall weight reported in the TranSearch data. This weight information is presented here: IMPORTS INTO THE 10-BEA REGION TOTAL WEIGHT FROM CANADIAN PROVINCES TO THE 10-BEAs From By Truck (tons) By Rail (tons) Nova Scotia 4, Newfoundland 0 0 Prince Edward Island New Brunswick 4,773 3,721 Quebec 125,508 77,173 Ontario 399, ,415 Manitoba 119,822 65,312 Saskatchewan 100, ,718 Alberta 124, ,300 British Columbia 141, ,947 Northwest Territories Total Tons 1,019,990 1,423,932 Kansas City - International Trade Processing Center Study 13

14 IMPORTS INTO THE 10-BEA REGION TOTAL WEIGHT FROM 3 MEXICAN REGIONS TO THE 10-BEAs From By Truck (tons) By Rail (tons) Northern Mexico 42,876 68,855 Middle Mexico 100, ,338 Southern Mexico 32,153 24,436 Total tons 175, ,629 The overall gross weight of trucks importing goods to the Kansas City area from Canada was 1,019,990 tons for 1996, the year of the data collection. This weight results in a range of between 51,000 and 102,000 trucks per year traveling into the Kansas City area from Canada. Reviewing the same information from Mexico shows an overall weight of 175,399 tons or between 8,770 and 17,540 trucks from Mexico to Kansas City in the 1996 period. NUMBER OF TRUCKS PER YEAR INTO K.C. REGION CANADA Load Weight Number of Trucks Fully Loaded Truck 40,000 lbs. = 20 tons 51,000 Partially Loaded Truck 20,000 lbs. = 10 tons 101,999 NUMBER OF TRUCKS PER YEAR INTO K.C. REGION - MEXICO Load Weight Number of Trucks Fully Loaded Truck 40,000 lbs. = 20 tons 8,770 Partially Loaded Truck 20,000 lbs. = 10 tons 17,540 Kansas City - International Trade Processing Center Study 14

15 Using an assumed rate of inspection of between 5 and 10 percent the number of trucks inspected in Kansas City can be estimated. Using the high and low end of the number of trucks per year traveling to Kansas City and a higher end of 10 percent inspected a trade processing center in the Kansas City area could expect between 23 and 45 trucks per day for inspection. RANGE OF TRUCKS INSPECTED AT K.C.-ITPC - CANADA Assume 10% (high end) are inspected Trucks per year Trucks per day Low End Estimate 5, High End Estimate 10, RANGE OF TRUCKS INSPECTED AT K.C.-ITPC - MEXICO Assume 10% (high end) are inspected. Trucks per year Trucks per day Low End Estimate High End Estimate 1, Survey Information 0HWKRGRORJ\ J\ The ETC institute sent international trade surveys to each of three groups identified as the freight community, small businesses and large businesses. The respondents could mail, fax, Kansas City - International Trade Processing Center Study 15

16 or telephone their thoughts, concerns and other pertinent information regarding international trade. In the Appendices to this report, we have included a thorough explanation of the survey methodology and tabulated the response sets for each individual question. Freight Carrier Survey Approximately 1000 surveys were mailed to a randomly selected group of freight carriers in a five-state region consisting of Kansas, Missouri, Iowa, Nebraska, and Oklahoma. Freight carriers were selected by SIC. The sample included rail carriers, trucking companies, air carriers and water transportation companies. The goal was to obtain at least 200 completed surveys in order to achieve results that had a 95% level of confidence with a precision of at least +/-6%. Follow-up phone calls, faxes, and on-site visits were conducted to achieve a total of 203 completed surveys. Large Business Survey Approximately 1000 surveys were mailed to a randomly selected group of large businesses in a four-state region consisting of Kansas, Missouri, Iowa, and Nebraska. The goal was to obtain at least 200 completed surveys in order to achieve results that had a 95% level of confidence with a precision of at least +/-6%. Follow-up phone calls, faxes, and on-site visits were conducted to achieve a total of 206 completed surveys. Only businesses with SICs related to manufacturing, retail trade, wholesale trade, warehousing, and agriculture were included in the sample. To be included in this category, businesses had to have annual sales of more than 25 million dollars. Large businesses were asked to identify the primary product sold by their firm at the site represented in the survey. Food and miscellaneous manufactured products were the two most frequently cited products. Small Business Survey Approximately 1200 surveys were mailed to a randomly selected group of small businesses in a four-state region consisting of Kansas, Missouri, Iowa, and Nebraska. The goal was to obtain a 33% response rate for a total of 400 completed surveys. The surveys were administered via phone, fax, mail, and on-site. A total of 409 surveys were completed. The results have a 95% level of confidence with a precision of +/- 5%. Small businesses were selected by SIC. To be included in this category, businesses had to have annual sales of less than 25 million dollars. The sample included the following types of businesses: manufacturers, retailers, wholesalers, warehousers, and agricultural firms. Kansas City - International Trade Processing Center Study 16

17 0DMRU )LQGLQJV The majority of all respondents ranked Kansas City as either an excellent or good location for an international trade processing center. Almost three-fourths (71%) of the freight carriers surveyed (including those in Oklahoma, Nebraska, and Iowa) rated Kansas City as either an excellent or good location for an international trade processing center. The same percentage (71%) of the large businesses surveyed (including those in Nebraska, and Iowa) gave the same ratings (either excellent or good) to Kansas City s location. More than two-thirds (69%) of the small businesses surveyed (including those in Nebraska and Iowa) rated Kansas City as either an excellent or good location. Only 3% of small businesses rated Kansas City as a poor location. While a paperless system for processing international trade is the core feature of an international trade processing center, several other features would be required to enhance Kansas City s attractiveness as a center for freight carriers and large businesses. All three categories of respondents listed access to multiple modes of transportation (i.e., air, truck, rail, ship) and the ability to clear Customs in Kansas City instead of at a coastal port or land border as fundamental requirements. The majority of all respondents indicate that the current system for processing international trade has a negative impact on their firm. Two-thirds (65%) of freight carriers surveyed indicated that the current system for processing international trade has a negative impact on their firm. Of these, one-third (32%) indicated that the current system prevents them from doing international trade in the first place; 26% indicated that it deters them from doing more international trade; 15% indicated that it causes them to lose business, and 14% indicated that it reduces the productivity of their firm. On average, freight carriers indicated that a seamless, automated system for processing international trade could reduce their costs of trading internationally by 6-9%. Three-fourths (75%) of the large businesses surveyed indicated that the current system for processing international trade has a negative impact on their firm. Of these, 59% indicated that the current system deters them from doing more international trade; 20% indicated that it prevents them from doing international trade in the first place; 17% indicated that it causes them to lose business, and 16% indicated that it reduces the productivity of their firm. The majority of all three categories of respondents indicated a desire to either initiate international operations or increase the amount of international trade that their firms do. Of the freight carriers that responded, 57% indicated that they would either like to initiate international operations or increase their international trade volume. Of the large businesses surveyed, 70% indicated that they wanted to increase the amount of international trade they do. Three-fifths (59%) of the small businesses surveyed gave affirmative responses. Kansas City - International Trade Processing Center Study 17

18 A lack of trained personnel was cited as the most significant barrier preventing firms from doing more international trade. Almost two-thirds (64.7%) of the freight carriers surveyed indicated that they were not more involved in international trade because it was either too complicated, they did not know how to get involved, or they did not have enough trained personnel. While more than two-thirds (69%) of the large businesses surveyed are already involved in international trade, a lack of trained personnel was the top reason large businesses gave for not being more involved. Almost two-thirds (65%) of the small businesses indicated that they were not more involved in international trade because it was either too complicated, they did not know how to get involved, or they did not have enough trained personnel. All three categories of respondents listed Canada and Mexico as their number one and two foreign market, respectively. Among freight carriers, 44% listed Canada and 34% listed Mexico as their top two trading partners. Among large businesses, the percentages were only slightly lower with Canada receiving 38% and Mexico receiving 33% of the total. While small businesses gave Canada and Mexico slightly lower market shares (27% and 21%, respectively), both countries were listed at least twice as often as the next most frequently listed country (Germany with 10%). While most freight carriers and small businesses indicated that they had not been affected by NAFTA, a considerable majority of large businesses indicated that the North American Free Trade Agreement had been positive for their firms. Of the large businesses that indicated they have been affected by the North American Free Trade Agreement (NAFTA), 88% indicated that they had been positively affected by NAFTA; 11% indicated they had been negatively affected. While 64% of freight carriers cited no impact from NAFTA, three times more respondents cited a positive impact (27%) than a negative impact (9%). Similarly, 71% of small businesses indicated no impact, but almost three times more small businesses cited a positive impact (21%) than a negative impact (8%). 2ULJLQ DQG 'HVWLQDWLRQRI6KL KLSPHQWV Freight Carriers Freight carriers were asked to indicate the origin and destination of shipments coming to and departing from their facility. The North Central region of the United States was the dominant trading partner for freight carriers responding to the survey. On average, 24% of the freight shipments that originate at sites represented in this survey are destined for the North Central region. One-fifth (20%) of the shipments that arrive at these sites are also from the North Central region. The North Central region includes: Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin. The South Central region, consisting of Texas and Oklahoma, was the second largest trading partner. Kansas City - International Trade Processing Center Study 18

19 Highlights On average, 67% of all shipments being moved by freight carriers responding to the survey originate outside Kansas and Missouri. More than half of this total originates in the North Central and South Central Regions. On average, 70% of all shipments being moved by freight carriers responding to the survey are destined for locations outside Kansas and Missouri. Almost half of this total is destined for the North Central and South Central Regions. On average, at least 7% of all shipments being moved by freight carriers responding to the survey are destined for Canada or Mexico. This number may be significantly higher because 45.8% of the freight carriers involved in international trade use freight forwarders to move shipments across international borders. Freight carriers who use freight forwarders would have identified a border state, such as Texas or Minnesota, rather than Mexico or Canada as the destination. On average, at least 3% of all shipments being moved by freight carriers responding to the survey originate in Canada or Mexico. This number may be significantly higher because many carriers do not cross international borders to pick up shipments. These carriers pick up shipments in border states, such as Texas or Minnesota. The majority of freight carrier sites in the Kansas City region have less than 10 loads arriving and departing each day. About one-tenth of the sites represented in the survey have more than 100 loads arriving and departing each day. Kansas City - International Trade Processing Center Study 19

20 Origin and Destination of Shipments Freight Carriers in the Kansas (The Percentage Reflects the Mean Percentage Reported By All Freight Who Responded to the Survey) Metropolitan Kansas City 14% 14% Kansas - Outside Metro KC 11% 9% Missouri - Outside Metro KC 8% 7% Southwest U.S. 7% 8% South Central U.S. 13% 14% Northwest U.S. 3% 4% North Central U.S. 24% 20% Northeast U.S. 6% 5% Southeast U.S. 7% Canada 2% 7% 4% Mexico 1% 3% 4% Other Overseas 5% 0% 5% 10% 15% 20% 25% 30% Source: ETC Institute Survey (9/30/98) Origin Destination Origin and Destination of Shipments Being Handled By Large Businesses in the Kansas City Region The Percentage Reflects the Mean Percentage Reported By All Large Businesses Who Responded to the Survey) Metropolitan Kansas City 6% 9% 12% Kansas - Outside Metro KC 12% Missouri - Outside Metro KC 13% 11% Southwest U.S. 6% 5% 7% South Central U.S. 8% Northwest U.S. 6% 5% 26% North Central U.S. 22% 7% Northeast U.S. 6% 8% Southeast U.S. 7% 1% Canada 4% 1% Mexico 3% Other Overseas 7% 8% 0% 5% 10% 15% 20% 25% 30% Source: ETC Institute Survey (9/30/98) Origin Destination Kansas City - International Trade Processing Center Study 20

21 2ULJLQ DQG 'HVWLQDWLRQRI6KL KLSPHQWV Large Businesses Large Businesses were asked to indicate the origin and destination of shipments coming to and departing from their facilities. The North Central region of the United States was the dominant trading partner for the large businesses responding to the survey. On average, 22% of the freight shipments that originate at sites represented in this survey are destined for the North Central region. One-fourth (26%) of the shipments that arrive at these sites are also from the North Central region. The North Central region includes: Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin. Nine percent (9%) of all shipments that arrive at the sites represented in the survey originate overseas; international shipments account for 15% of the destinations. Highlights On average, 69% of all shipments to large businesses represented in the survey originate outside Kansas and Missouri; 38% of this total originates in the North Central Region. On average, 68% of all shipments from large business sites represented in the survey are destined for locations outside Kansas and Missouri; 32% of this total is destined for the North Central Region. With the exception of the North Central region, Domestic shipments are evenly distributed among U.S. regions. The Northwest, Southwest, Northeast, Southeast, and South Central regions each account for approximately 5-8% of all shipments to and from the large business sites represented in the survey. On average, at least 15% of all shipments from large business sites represented in the survey are destined for other nations. Shipments to Canada and Mexico account for 47% of the overseas volumes. On average, at least 9% of all shipments to large business sites represented in the survey originate overseas. Shipments from Canada and Mexico account for almost one-fourth (22%) of these shipments. The majority of large business sites in the Kansas City region have less than 10 loads arriving and departing each day. About one-third have loads arriving and departing each day. Kansas City - International Trade Processing Center Study 21

22 &XUUHQW /HYHOHO RI,QYROYHPHQW LQ Q,QWHUQDWLRQDO 7UDGH Freight Carriers Almost half (42%) of the freight carriers indicated that they are involved in at least some type of international trade. Of those involved in international trade, most were involved in more than one activity. More than two-thirds (72%) were involved with the exportation of finished goods. Half (54%) were involved with the exportation of raw materials; 51% imported finished goods, and 49% were involved with the importation of raw materials. Freight carriers were asked to identify the two nations with which they were most involved in international trade. Canada (44%) and Mexico (34%) were most frequently mentioned. Other nations that were specifically mentioned included: the United Kingdom, Germany, Brazil, Japan, China, Hong Kong, Belgium, Singapore, Israel, Australia, Taiwan, and Korea. Large Businesses More than two-thirds (69%) of the large businesses indicated that they are involved in at least some type of international trade. Of those involved in international trade, most were involved in more than one activity. More than two-thirds (72%) of those surveyed export finished goods. One-fourth (23%) export raw materials; 35% import finished goods, and 25% import raw materials. Large businesses were asked to identify the two nations with which they were most involved in international trade. Canada (38%) and Mexico (33%) were most frequently mentioned. Other nations that were specifically mentioned included: Japan, China, the United Kingdom, Taiwan, Germany, the Netherlands, Brazil, Hong Kong, Belgium, Spain, Singapore, Israel, Philippines, Australia, Taiwan, Switzerland and Korea. Small Businesses Almost half (46%) of the small businesses indicated that they are involved in at least some type of international trade. Of those involved in international trade, most were involved in more than one activity. Two-thirds (67%) of those surveyed export finished goods and 14% export raw materials. One-third (33%) of those surveyed import finished goods and 22% import raw materials. Small businesses involved in international trade were asked to identify the two nations with which they were most involved in international trade. Canada (27%) and Mexico (21%) were the most frequently mentioned nations. Europe was the most frequently mentioned region followed by Asia. Nations that were specifically mentioned included: Germany (10%), the United Kingdom (10%), Japan (9%), China (8%), Taiwan (8%), Italy (5%), Brazil (4%), Australia (4%), Switzerland (3%), Netherlands (2%), Spain (2%), Philippines (2%), Hong Kong (1%), Belgium (1%), Poland (1%), Singapore (1%), Panama (1%), Kansas City - International Trade Processing Center Study 22

23 Jamaica (1%), Israel (1%), Bermuda (1%), Korea (1%), Indonesia (1%), Ireland (1%), and the Dominican Republic (1%). Top Two Countries Where Freight Are Involved In International Trade By percentage of freight carriers who indicated they are involved in international trade The percentage exceeds 100% because carriers identified up to 2 countries where they are involved in international trade. Canada 44% Mexico 34% Asia (Top 3 nations: China, Japan) 24% Europe (Top 2 nations: UK, Germany) 18% Other Latin America (Top Nation: Brazil) 8% Source: ETC Institute Survey (9/30/98) 0% 10% 20% 30% 40% 50% 60% Top Two Countries Where Large Businesses Are Involved In International Trade By percentage of large businesses who indicated they are involved in international trade The percentage exceeds 100% because businesses identified up to 2 countries where they are involved in international trade. Canada 38% Mexico 33% Asia (Top 2 nations: Japan, China, Taiwan) Europe (Top 2 nations: UK, Germany) 34% 37% Other Latin America (Top Nation: Brazil) Australia/New Zealand 4% 6% Africa 3% 0% 10% 20% 30% 40% 50% 60% Source: ETC Institute Survey (9/30/98) Kansas City - International Trade Processing Center Study 23

24 Top Two Countries Where Small Businesses Are Involved In International Trade By percentage of small businesses who indicated they are involved in international trade The percentage exceeds 100% because businesses identified up to 2 countries where they are involved in international trade. Canada 27% Mexico 21% Asia (Top 3 nations: Japan, China, Taiwan) 34% Europe (Top 3 nations: Germany, UK, Italy) 54% Other Latin America (Top Nation: Brazil) 13% Australia/New Zealand 5% Africa 2% 0% 10% 20% 30% 40% 50% 60% Source: ETC Institute Survey (9/30/98) %DUULHUVWR W,QWHUQDWLRQDO 7UDGH Freight Carriers A lack of training and a concern about the cost of trading internationally are the two most common barriers cited as an explanation for why freight carriers are not more involved in international trade. More than half (57%) of the freight carriers indicated they wanted to increase their volume of international trade. However, two-thirds (64.7%) of those wanting to increase their volume of international trade indicated that their involvement was constrained by the complexity of international trade and by insufficient trained personnel. Large Businesses More than two-thirds (70%) of the large businesses indicated they wanted to increase the amount of international trade they do. However, training and cost pose significant barriers. A lack of trained personnel is the number one reason large businesses are not more involved in international trade. It is followed closely by concerns that international trade is too expensive and/or too complicated. Kansas City - International Trade Processing Center Study 24

25 Small Businesses A lack of knowledge and a concern about the cost of trading internationally are the two most significant reasons small businesses are not more involved in international trade. More than half (57%) of the small businesses indicated they wanted to increase the amount of international trade they do. However, two-thirds (65%) of those who wanted to increase the amount of international trade they do indicated they were not more involved in international trade because it was either too complicated, they did not know how to get involved, or they did not have enough trained personnel. Reasons Freight Carriers Are Not More Involved In International Trade (By Percentage of Reasons Given By Freight Carriers Who Want to Increase the Amount of International Trade They Do) MOST SIGNIFICANT BARRIERS = EDUCATION and COST Too complicated 22.8% We Don't Know How 24.8% Too expensive 15.8% Payment Terms 8.9% Takes too long Damage to equipment 5.9% 3.0% Lack of trained personnel 18.8% Source: ETC Institute Survey (9/30/98) Kansas City - International Trade Processing Center Study 25

26 REASONS BUSINESSES ARE NOT MORE INVOLVED IN INTERNATIONAL TRADE Small Businesses Too complicated 20% We Don't Know How 24% Too expensive 11% Lack of trained personnel 21% Takes too long 10% Damage to equipment 3% Payment Terms 12% Source: ETC Institute Survey (9/30/98) Large Businesses MOST SIGNIFICANT BARRIERS = EDUCATION and COST Too expensive 17.2% Too complicated 16.1% We Don't Know How 16.1% Damage to equipment 4.0% Lack of trained personnel 20.1% Takes too long 12.1% Payment Terms 14.4% Source: ETCInstitute Survey (9/30/98) Kansas City - International Trade Processing Center Study 26

27 3HUFHLYHG,PSDFW RI WKH H &XUUHQW 6\VWHP IRU 3URFHVVLQJ,QWHUQDWLRQDOO 7UDGH Freight Carriers Freight carriers generally perceive that the current system for processing international trade is complicated. On average, freight carriers responding to the survey indicated that a seamless, automated system for processing international trade could reduce their costs of trading internationally by 6-9%. One-third (32%) indicated that complications involving international trade processing activities prevent their firm from getting involved with international trade in the first place. One-fourth (26%) indicated the current system for processing international trade prevents their firm from doing more international trade. While less than half (46%) of the freight carriers who are involved in international trade rated the system for processing international trade at the Canadian border as complex, nearly three-fourths (72%) rated the same system at the Mexican border as complex. Large Businesses Three-fourths (75%) of the large businesses indicated that the current system for processing international trade has a negative impact on their firm. Of these, 59% indicated that the current system deters them from doing more international trade; 20% indicated that it prevents them from doing international trade in the first place; 17% indicated that it causes them to lose business, and 16% indicated that it reduces the productivity of their firm. Of the large businesses involved in international trade, 58% rated the current system for processing international trade as OK (45%) or poor (13%). Only 6% rated the current system as excellent. Small Businesses Most small businesses were not able to rate the current system for processing international trade because they do not presently trade internationally. Of those involved in international trade, 74% rated the current system for processing international trade as OK (47%), or poor (27%). Only 4% rated the current system as excellent. Kansas City - International Trade Processing Center Study 27

28 'HOD\VDW D %RUGHU &URVVLQJV Freight Carriers Mexico. Two-thirds (66%) of the freight carriers who are conducting trade with Mexico indicated that the average delay at the border caused by trade processing activities is 4 hours or more. One-fifth (20%) indicated that the average delay caused by trade processing activities is 2 days or more. Canada. Almost half (45%) of the freight carriers who are conducting trade with Canada indicated that the average delay at the border caused by trade processing activities is 4 hours or more; 14% indicated that the average delay caused by trade processing activities is 2 days or more. These delays have a negative impact on freight carrier operations. Eighty-one percent (81%) of the freight carriers who responded to the survey indicated that it was important to their operation to receive or make deliveries by a certain time of day. Delays at border crossings can prevent freight carriers from meeting delivery schedules, which deter them from increasing their involvement in international trade. Large Businesses Mexico. Almost half (48%) of the large businesses who are conducting trade with Mexico indicated that the average delay at the border caused by trade processing activities is 4 hours or more. One-fifth (21%) indicated that the average delay caused by trade processing activities is more than 24 hours. Canada. More than one-third (38%) of the large businesses who are conducting trade with Canada indicated that the average delay at the border caused by trade processing activities is 4 hours or more; 13% indicated that the average delay caused by trade processing activities is more than 24 hours. These delays have a negative impact on large businesses. Eighty-one percent (81%) of the large businesses who responded to the survey indicated that it was important to their operation to receive or make deliveries by a certain time of day. Delays at border crossings can prevent large businesses from meeting production schedules, particularly those with just-in-time management systems. It is likely that these businesses may unintentionally under-report the frequency of delays because their freight carrier has already factored a delay time into their delivery schedule. Kansas City - International Trade Processing Center Study 28

29 Technology More than half (57%) of the respondents indicated that their firm uses proprietary technology to track freight shipments. Cellular technology is being used by more than onethird (34%) of the respondents. Other types of technology that are being used by a significant percentage of freight carriers include the Internet (21%), electronic data interchange (21%), and satellite (19%). Some freight carriers reported using more than one type of technology.,psdfw RI 1$)7$ Freight Carriers Two-thirds (64%) of the freight carriers surveyed indicated that they have not been affected by the North American Free Trade Agreement (NAFTA). Of those who had been affected, the ratio was 3 to 1 for those reporting a positive impact (27%) compared to those reporting a negative impact (9%). Large Businesses More than half (57%) of the large businesses surveyed indicated that they have not been affected by the North American Free Trade Agreement (NAFTA). Of those who had been affected, the ratio was almost 8 to 1 for those reporting a positive impact (38%) compared to those reporting a negative impact (5%). Small Businesses Almost three-fourths (71%) of the small businesses surveyed indicated that they have not been affected by the North American Free Trade Agreement (NAFTA). Of those who had been affected, the ratio was 2.6 to 1 for those reporting a positive impact (21%) compared to those reporting a negative impact (8%). 6KLSSLQJJ 0HWKRGV Freight Carriers Freight carriers who indicated they were involved in international trade were significantly more likely to use freight forwarders at border crossings. Almost half (45.8%) of freight carriers who indicated they were involved with international trade said they use freight forwarders at international border crossings, compared to 25% of all respondents. Of those using freight forwarders, 42% indicated that they use freight forwarders for 100% of their international shipments. Customs brokers were significantly more important to freight Kansas City - International Trade Processing Center Study 29

30 carriers who indicated they were involved with international trade. Two-thirds (67%) of freight carriers who indicated they were involved with international trade thought customs brokers were either very or somewhat important compared to 48% of all respondents. Large Businesses Most large businesses are very involved in shipping decisions. Three-fourths (77%) of those surveyed indicated that they select the shipping method and route for items they receive. Less than one-fifth (19%) have their suppliers select the shipping method and route, and 3% use parcel carriers to deliver items to their site. Almost all (90%) select the shipping method and route for items they send; 7% have their customers arrange the shipping method and route; 29% use parcel carriers to send items from their site. Small Businesses Most small businesses are very involved in shipping decisions. Half (50%) of those surveyed indicated that they select the shipping method and route for items they receive. Half (51%) have their suppliers select the shipping method and route, and 7% use parcel carriers to deliver items to their site. Almost three-fourths (70%) select the shipping method and route for items they send. One-fourth (28%) have their customers arrange the shipping method and route; 9% use parcel carriers to send items from their site. 1.3 Regional Trade Regional Trade with a Potential Pass Through Kansas City A broader view of international trade was considered to provide a framework for identifying the potential trade that Kansas City might capture in the international arena. This analysis examines U.S. regional trade (by transportation mode) and its potential impact on the transportation infrastructure of Kansas City. In addition to considering freight flows in and out of the Kansas City catchment area, this analysis also researches freight flows in a regional context. To fully exploit the area s freight movements, the ITPC must capture the opportunity to add value to freight transfers moving through the metropolitan area. For example, local labor could consolidate, process or re-package commodities moving between Mexico and the U.S. Northwest or moving between Canada and the U.S. Southern states. Accordingly, the United States was divided into four quadrants (see Appendix C for a listing of States in each quadrant). For the U.S. Northeast, regional import and export trade with Mexico (see figure 1-3) was studied to identify those shipments that could pass through Kansas City via the interstate or rail network. Similarly, the U.S. Southeast was studied for its import and export trade with Western Canada (see figure 1-4), and the U.S. Southwest was studied for its import and export trade with Eastern Canada (see figure 1-5). It is reasonable to assume that imports and exports from the US Northwest would travel to Kansas City - International Trade Processing Center Study 30