U.S. Firms Feel the Pinch of Tighter Border Security

Newly painted Boeing jumbo jets sit for days on a tarmac in Seattle because their foreign buyers are unable to obtain visas for their pilots to come to the United States for training so they can fly their multimillion-dollar purchases home.

A $5-million metal-cutting machine has been stranded at a Cincinnati factory for four months because its Chinese purchaser, Chengdu Aircraft Co., can’t get its engineers into the U.S. for a final inspection.

Florida tour operators complain that they are losing business to Canada and South America because it is taking Mexican travelers up to four months to get U.S. visas.

U.S. companies, heretofore worried about appearing to be unpatriotic profiteers, are becoming increasingly unhappy -- and vocal -- about the campaign to secure America’s borders.

Measuring the fiscal fallout from the war against terrorism is difficult because it cuts across a broad swath of industries and has varying effects depending on a company’s size, its dependence on foreign markets and its place in the global supply chain. But anecdotal evidence suggests that the homeland security effort is adding a huge amount of expense and uncertainty to a struggling U.S. economy.

Indeed, executives say security efforts are strangling legitimate global commerce and costing tens of millions of dollars in lost business, extra handling and storage fees and increased paperwork. Beyond the short-term losses, firms fear that the U.S. is imperiling its economic recovery and future competitiveness by encouraging frustrated foreign customers to do business with more amenable rivals.

Security measures “that are in place or are evolving have become so cumbersome and so lengthy that it is extremely difficult for us to conduct business in any regular fashion,” said Bob Bauerline, Boeing Co.’s vice president of international operations.

The problem could get worse, traders warn, if the U.S. implements proposed “advance electronic notification” rules for imports and exports. That’s because these regulations could severely restrict the operation of overnight air cargo services and companies dependent on “just-in-time” delivery for their manufacturing lines and retail stores.

U.S. business leaders insist that their intent is not to undermine legitimate efforts to protect American citizens. But they say the government has gone overboard in its rush to shore up its borders, creating red tape that is overwhelming a homeland security apparatus that is ill-prepared to cope.

“The only way to get to zero risk is to not let anything in, and that makes no sense in a globalized world,” said William Reinsch, a former Commerce Department official who heads the National Foreign Trade Council, a business group based in Washington. “You have to balance and minimize your risk. We’re concerned that this has tilted too far.”

U.S. officials say they are working to minimize the negative effects of the anti-terrorism campaign on business. But when the country is on high alert for possible terrorist attacks, keeping America’s borders secure is their top priority.

“The goal is not to impede U.S. business or the advance of science, but the priority is national security,” said Stuart Patt, a spokesman for the State Department’s consular affairs bureau. “Unfortunately, there is going to be some inconvenience to other sectors.... That’s just the world we live in.”

The most serious business complaints arise from tighter controls on foreigners entering the U.S. Since the Sept. 11 attacks, the U.S. has revamped the visa process, dramatically increasing the number of applications receiving special screening by the State Department, FBI and CIA. Males from the Middle East or predominantly Muslim countries are getting the closest scrutiny. But businesspeople from Russia, China, India, Eastern Europe and Vietnam also are getting caught in the net because of concerns about sensitive technology falling into the wrong hands, according to immigration lawyers and U.S. companies.

“Nobody wants to make a mistake, even a mistake that has nothing to do with terrorism,” said Crystal Williams, information director for the American Immigration Lawyers Assn. “Everybody feels under a microscope.”

For U.S. multinationals accustomed to moving people and products around the world, getting a visa for a foreign customer or employee has become a huge headache. Routine visa applications that used to take fewer than 10 days to process now take up to six months to wend their way through the system, according to U.S. companies. Late last year, the State Department acknowledged that it had a backlog of at least 20,000 visa applications, though it now says it has worked through most of those cases.

Boeing has had a number of cases in which foreign customers have spent months, sometimes unsuccessfully, trying to get visas for their pilots to visit the airplane maker’s facilities for routine training or to take delivery of new jetliners, Bauerline said. He declined to name the airlines involved but said the biggest problems involved the Middle Eastern and predominantly Muslim countries being focused on by the Bush administration.

“I think there is a danger that the current system could confuse our customers at best and could drive them into the arms of other suppliers at worst,” said Bauerline, who estimated that Boeing has spent millions of dollars dealing with the new security restrictions.

The visa issue has become particularly burdensome in China, where U.S. firms are fighting for a share of one of the world’s fastest-growing technology markets.

Chip Storie, vice president of marketing for Cincinnati Machine Inc., spent months trying to persuade officials to give him an export license so he could sell a high-tech metal-cutting tool to Chengdu Aircraft last year. The Chinese aerospace firm, a major Boeing supplier, was going to use the machine to build tail components for Boeing’s 757. But four months after its completion, the gear still sits in Cincinnati because the Chinese company has been unable to obtain visas to the U.S. for its personnel.

“I’m not getting paid because I can’t ship the product, and my customer is upset because the U.S. government had already approved to ship this equipment,” said Storie, whose firm is a subsidiary of Woodland Hills-based Unova Inc.

More worrisome is the potential effect on Cincinnati Machine’s future business in China, its largest export market. Competitors in Europe and Japan are taking advantage of the situation, painting the U.S. as an unreliable business partner because of the increased security controls, Storie said.

“I have another $15 million to $20 million in business I’m pursuing in China, and the Chinese are telling us that they have significant concerns about giving us orders,” he said. “They don’t know if they’ll be able to do business with us in a normal fashion.”

Tightened security also has dealt a blow to the battered travel industry. International travel to the U.S. is down significantly, with arrivals from the Middle East dropping by more than 50% in the last part of 2002. In part, that reflects the tighter security that has translated into increased costs and hassle for foreign visitors, according to Rick Webster, director of government affairs at the Travel Industry Assn. of America, a Washington trade group.

At a time when hotels and restaurants are desperately looking for ways to boost business, the unpredictability of the visa process is causing conference and trade show planners to rethink holding meetings in the United States for fear their foreign participants will be unable to attend.

“We need to reassure the traveler that we’re open to business and the welcome mat has not been pulled,” Webster said.

Looming are new U.S. Customs Service regulations that would require advance notification on all cargo entering and leaving the U.S. One tentative proposal would require U.S.-bound air carriers to provide cargo data eight hours before loading up a regular flight and four hours before loading up a plane operated by a courier service such as FedEx. Federal officials want that information in advance so they can stop a suspicious shipment before it reaches the U.S.

But John Simpson, president of the American Assn. of Exporters and Importers, said such a pre-notification requirement would be devastating for an express cargo industry that has built its business around last-minute shipping and overnight deliveries.

“If Customs imposes a preloading reporting requirement that prevents the air couriers from engaging in their quick handoff at the hub and spoke, they are out of the overnight business,” he said.

John Considine, director of cargo verification for Customs, said that the advance notification rules are still on the drawing board and that his agency is soliciting comments from trade groups to ensure the “smooth introduction of the new procedures.” Customs already has imposed a 24-hour advance notification for ocean shippers.

Tougher standards to protect America’s food chain from sabotage also are causing anxiety among the nation’s food growers, processors and retailers. The Food and Drug Administration has proposed regulations requiring that an estimated 400,000 domestic and foreign food processors register with the U.S. government. Another proposal would require importers to notify the U.S. government a day before any food products are brought into the United States. Both rules would take effect in December.

Rhona Applebaum, chief science officer for the National Food Processors Assn., a Washington trade group, said the proposed rule would duplicate information already required by Customs and could create costly backlogs for U.S. food importers that depend on “just-in-time” delivery of fresh produce for their factories and their retail operations.

She said the FDA estimates the U.S. food industry could lose as much as $6.5 million in perishable goods if the proposed rule is adopted.

Meanwhile, another U.S. industry says it also is being inconvenienced by tightened security: ski resorts. They often hire foreign explosives experts to trigger controlled avalanches, and new federal measures have added restrictions on who can handle dynamite.