How high? It's getting harder, and more expensive, to sell to the world's biggest consumer.

Exporters to the United States after Sept. 11, 2001 have had to make major adjustments to meet a mountain of tough, new federal regulations, rules that continue to pile up. Over the coming months, U.S. authorities will tighten the final screws on a behemoth, all-encompassing security machine, escalating costs for international trade.

Those added costs come as the United States negotiates a laundry list of bilateral trade deals as it heads toward completion by year's end of the granddaddy of them all, the Free Trade Area of the Americas (FTAA), much-heralded as creating the world's richest trading bloc. Each smaller deal, too, hinges on actually being able to reach the world's most voracious consumer market, the US$11 trillion U.S. economy.

So, is the United States closed for business? "Of course the U.S. is open for business," says Ambassador Cresencio Arcos, director of International Affairs for the U.S. Department of Homeland Security. "The issue is, this is not a one-dimensional problem. We cannot ignore the security. It's striking a balance. It's an issue we face continuously. Los costos, that's what everybody's pissed off at."

Los costos, the costs, is also what everybody is trying to keep a lid on. Balancing security and the free flow of legitimate trade means meeting regulations and staying in business. "This is like termites in the basement: It's slowly eroding the trade competitiveness of trade hubs like Miami, Los Angeles and others," says Antonio Villamil, a former U.S. Undersecretary of Commerce for Economic Affairs and current chair of the Florida Governor's Council of Economic Advisors. "And we don't see it as a slow process. It impacts the potential for expansion of international business, which is the critical component of trade."

In view of what many see as the makings of a major bottleneck looming over the horizon, shippers, exporters and customs agents are dancing a kind of two-step: They're lobbying Washington to be reasonable about rules while scrambling to meet security deadlines.

Small problems can get big fast. DHL Express had a run-in with the new regulations as they were introduced in November, says Cindy Haring, director of Global Customer Solutions for DHL Latin America in Mexico. DHL had a customer's cargo flying in from the Far East in transit through Miami International Airport with a final destination of Mexico. "The documentation the airline was presenting was rejected by customs in Miami and we were working closely with the airline. We ended up having to take it up all the way to customs in Washington D.C. Miami customs had their own interpretation [of the regulations]. This took weeks."

The cargo was nevertheless critical to the client, an auto manufacturer in Mexico. The delay shut down assembly lines. "It wasn't perishables, but you shut down the line and it costs hundreds of thousands of dollars," Haring says. "And this is what our customers are confronting. We have a transit time, and they're expecting it."

Delays derail a key productivity tool--just-in-time inventory, where parts are ordered and shipped as needed to minimize warehouse costs. The method, made popular by Japanese factories in the 1980s, hinges on fast, reliable shipments. "We had extra staff working, manning the desk 24 hours a day, to be working with the airline and cover all bases and make sure the information was correct," says Haring.

It also prompted DHL to go the extra mile to avoid a repeat performance. "We've taken many steps, training our officers overseas and our customers as to what these new rules mean," Haring says. In addition, each DHL office in Latin America has been reconfigured to include one employee dedicated to ensuring that documentation meets U.S. requirements.

Containing costs while complying with new rules is a constant challenge, especially when dealing with food and flowers that can spoil in hours if delayed. Poorly applied, security rules reduce the trade advantage of areas with geographic proximity to the United States, such as Central America, where 75% of exports are perishables like plants and fresh vegetables, fruit and seafood.

The Latin American Association of Express Companies (Cladec) saw the writing on the wall months ago and began taking steps to make sure its customers' cargo, especially perishables, did not perish en route. Cladec represents express delivery providers serving Latin America and the Caribbean--FedEx. UPS, DHL Express and TNT--and the domestic express industry associations in Latin America. Cladec members transport documents, packages and freight throughout 34 countries and employ more than 11,000 people in the Americas.

Its approach includes new technology, which the 10-year-old trade association knew would be a big part of the answer. Cladec 18 months ago began developing software that met U.S. regulations for advance electronic notification of shipments.

The association has been working with customs officials in the United States, Chile and Argentina, where the project has been started, to develop software as part of a risk-assessment program. "As soon as the plane takes off ... we can transmit the information of what kind of packages are in the plane, who sends them, what the value is and how much they weigh," says Ana M. Guevara, chairman of Cladec's International Trade Committee and vice president for public affairs at UPS. "That goes electronically to customs. The software we've developed will allow customs to pull out and sort that information."

Profiling. Without the software, carriers end up having to open every single package before sending it to customs to make sure, Guevara says. With the system in place, the customs officials in that country would be able to do a kind of cargo profiling. For example, they could request all packages originating from a given country, or pull out packages that have a value of less than $20 but weigh more than 50 kilograms. "With those characteristics, it's suspicious," says Guevara. "Packages that aren't picked have the ability to move faster."

Since time is money, efficiency translates into lower costs while still meeting the U.S. government's demands for increased scrutiny of cargo.

In Argentina, the software is expected to be installed by the end of the second quarter. In Chile, it has been in place for more than a year. "The biggest challenge we have found is the lack of resources from the country," Guevara says. "They want to do the work, but they don't have the resources. Then there's [the cost of] hardware and software."

Software should put a dent in antiquated, paperbound customs processes in Latin America, where less than 10% of customs operations are automated. In the United States, nearly 100% of customs operations are now automated. Cladec will look next to the Dominican Republic and Paraguay for similar risk-assessment software implementation.

Frank Santeiro, FedEx managing director of Global Trade Services for Latin America and the Caribbean, says his company depends on its own automated systems to meet U.S. Customs and the U.S. Food and Drug Administrations (FDA) requirements, especially on perishable cargo. "We have to do operational tweaks and systems tweaks as requirements get tighter and tighter," says Santeiro. "Automation is the key and that automation will be honed."

The shipping business itself has totally changed, says Dante F. Versaci II, president of the 600-member Florida Customs Brokers and Forwarders Association. In fact, he says, the entire supply chain has to restructure in order to meet delivery expectations under the new rules. "In years past it was I'll ship it and then I'll worry about documentation.' Now everything has to be done up Front," says Versaci. His association has spent the past two years organizing training sessions with the latest updates on changes to the new rules.

A customs broker's most critical job now is to prepare and file documentation as far in advance as possible, to give government officials time to review it before it arrives at port, Versaci says. "Because once it gets to the shore, there's a whole other physical examination of the cargo. And if you go from a yellow to an orange [U.S. government terrorism alert level] you'll go up significantly in the amount of time spent," he says.

That makes business relationships of crucial importance. Versaci figures rates might rise, but only if the supply chain sees additional value added because brokers are doing more for them to expedite the process of getting into the United States. "In the cargo business, we've gone from over 200 years of working one way to two years of working in a new way," Versaci says. "There's an adjustment learning curve, but it's moving quickly."

Peter Quintet, a former U.S. Customs Department lawyer now in private practice in Miami, says that the trade industry is ticked off but hesitant to speak out publicly. "Very few people will want to go on the record speaking against someone that will control their destiny," says Quinter, a partner at the Miami law firm of Becker & Poliakoff, which represents airlines, customs brokers, importers and exporters from Latin America and the Caribbean.

Take the U.S. Bioterrorism Act, which aims to protect the U.S. food supply. Administered by the FDA, the act is designed to track food once it has entered the United States in case contamination is found. "It has caused a panic with companies sending food and beverages to the United States," Quinter says. "They need to register with the U.S. FDA; but even if they do that, they fear their food and vegetables will be examined and destroyed."

Warehoused. On May 13 falls the next interim enforcement date for food inspection. "At least a third of all cargo is perishable. Food and food related items account for 20% of all US imports," Quinter says. "A shipment of fresh salmon from Chile, you don't want that to sit in a warehouse."

Quinter, a board member of the Miami World Trade Center, says the new laws, which increase visa requirements, have affected the food industry in another way: In 2002, the Trade Center had 37 exhibitors from Brazil at its annual Food Show. In November 2003, there were seven exhibitors. "That's the most shocking part of it: The same exhibitors who arrived in 2002 could get a visa easily, but now they're not even getting the chance to be interviewed at the consulates," he says.

About 250 kilometers south of Santiago is Chile's Valle Central, and at the southern end of that is Valle del Maule, which produces half of all Chilean wine and where the 82-year-old family-run Vina El Aromo has been growing Cabernet, Merlot and Carmenere grapes for wine. They've been exporting about 5,000 cases of wine a year to the United States, but with the U.S.-Chile trade deal that kicked in Jan. 1, export manager Maria Pia Merani says they're looking to double that amount to 10,000 cases, craning in mostly through the port of New York City in closed containers. "The rules are, I won't say 'easy' but they do make sense," says Merani.

When the changes began in the middle of 2003, Merani and her company began to gather information from the Chilean government, the media and other companies and to attend seminars. "The truth is that it's pretty simple. We haven't changed anything at our company," she says. "We do have to pay more attention, but we haven't had to restructure.... I think that this is more scary than it is difficult."

Know the Rules

Advance Manifest Program: Twenty-four hours before cargo is put on a ship the manifest has to be transmitted to U.S. Customs. If a container receives a do-not-load message after the ship has left port, the ship will be ordered to drop off the container at another port before continuing to the United States.

Aviation and Transportation Security Act: Addresses security in and around airports and aboard commercial aircraft.

Bioterrorism Act: Seeks to avert a biological terrorist attack by keeping track of the supply chain of food and drugs coming into the United States. Among requirements are that companies that manufacture, process, pack or hold food for export to the United States register with the U.S. Food and Drug Administration and give prior notice of imported food shipments.

Container Security Initiative (CSI): Stations U.S. Customs officials at foreign ports to assure the integrity of containerized cargo bound for the United States.

Customs Trade Partnership Against Terrorism (C-TPAT): A public-private program wherein companies voluntarily implement procedures to secure cargo against terrorism. Companies designated "low-risk" importers get through border checks more quickly.

Enhanced Border Security and Visa Entry Reform Act: Deals mainly with immigration issues, setting forth new requirements for foreigners obtaining visas to enter the United States. Starting Jan. 5, foreign visitors to the United States who need visas to enter the country were fingerprinted and photographed.

Free and Secure Trade (FAST): Provides expedited processing for companies that adopt approved security measures. FAST measures include special identification cards for truck drivers, high-security mechanical seals on all containers or trailers and radio-frequency transponders on trucks.

Homeland Security Act: Created the Department of Homeland Security, the umbrella for 22 existing U.S. government agencies, including Customs, Border Protection and the inspection sections of the Immigration and Naturalization Service and of the Department of Agriculture, which handles animal and plant inspections and quarantine.

Maritime Transportation Security Act: Protects U.S. vessels and seaports from terrorist attack. Security assessments are being made at 55 critical ports nationwide; security plans are required on more than 10,000 vessels and 5,000 facilities; and verification and audit teams have been sent abroad to check security programs at 2,500 foreign ports.

USA Patriot Act: Imposes stricter regulations on financial institutions, with the intent of knowing customers and tracing financial transactions, including money laundering.

SOURCE: U.S. Customs and Border Protection, U.S. Department of Homeland Security, U.S. Food and Drug Administration