Canada's trucker vaccine rule making freight, fruit pricier
New rules requiring truckers to show proof of vaccination when crossing the Canada-U.S. border are cutting into shipping capacity and boosting the cost of hauling everything from broccoli to tomatoes, with the potential impacts growing for Michigan's trucking, auto and agricultural industries.
The cost of transporting produce out of California and Arizona to Canada jumped 25% last week as fewer trucks are available to cross the border, according to George Pitsikoulis, president and chief executive officer of Montreal-based distributor Canadawide Fruits.
“The lower the supply, the higher the price. Ultimately it’s the consumer that pays for this,” Pitsikoulis said Monday by phone.
Canada implemented new rules on Saturday that require border agents to turn away unvaccinated U.S. truckers, a move industry executives warned could slow down supply chains that are already under stress. Canadian truckers who can’t show proof of vaccination will be required to quarantine when they re-enter the country from the U.S.
Shipping is expected to get disrupted in both directions, with the U.S. set to impose its own vaccine mandate on foreign travelers Saturday. Only 50% to 60% of U.S. truckers are vaccinated, according to an estimate from the American Trucking Associations.
Though there have been some delays at ports of entry to Canada following the implementation of the vaccine requirement, the concern now centers on supply shortage and price impacts.
Michigan companies could be some of the most affected. The Great Lakes state sent more than $23 billion in goods to Canada, its largest international trade partner, in pre-pandemic 2019, according to the U.S. Census Bureau. The border crossing between Windsor and Detroit is North America's busiest, with more than $175 billion in annual trade.
Brian Hitchcock, who owns MBH Trucking out of Webberville near Lansing and is the chairman of the Michigan Trucking Association, lost half of the drivers he had on the roster for Canada deliveries as a result of the vaccination requirement. He noticed some delays this weekend, but suspects the bigger effects on an already struggling supply chain will be felt in coming weeks.
"Right now we're going to be OK, but we definitely would entertain a new employee that could cross," Hitchcock said. "They're going to become needed for all carriers. They're gonna become very needed."
It's likely some carriers may need to offer bonuses or pay increases to encourage drivers to get vaccinated and to keep those who have gotten the shots, experts say. That could result in increased costs for consumers.
"We're already feeling some price inflation," said Christopher Sands, director of the Wilson Center’s Canada Institute, and a specialist on U.S.-Canadian relations. "It's going to end up in grocery store shelves, but also eventually in the price of all kinds of products that we make together with the Canadians, because drivers are going to want more and they're going to be choosy about their routes."
Bison Transport Inc., one of Canada’s largest trucking firms, is poised to lose 10% of its freight capacity as a result, prompting the company to boost wages for cross-border drivers and offer signing bonuses of C$2,500 (about $2,000). Those costs have to be passed on to customers, Chief Executive Officer Rob Penner said.
“We understood that this would be a challenge for us,” Penner said in a Monday interview on BNN Bloomberg Television. “We have lost close to 10% of our overall capacity, with many drivers choosing to opt out prior to the deadline.”
Winnipeg, Manitoba-based Bison, which is owned by conglomerate James Richardson & Sons Ltd., has about 3,700 employees and contractors operating a fleet of 2,100 tractors and 6,000 trailers, according to its website.
There are already concerns large companies will have be forced to pay up to secure vaccinated drivers, hiking freight costs, said Ron Lemaire, president of the Canadian Produce Marketing Association.
“I have heard anecdotally that truckers are looking to stop hauling perishable products as there are too many risks if they are delayed in their delivery,” Lemaire said by email, noting the association will be closely watching the impact on the supply chain.
Michigan exports many motor parts and vehicles to Canada, but agriculture is also a major business for the state, with more than $900 million in goods exported annually to Canada, according to the Michigan Farm Bureau.
"The agricultural supply chain is already facing pandemic-related challenges, and risks massive disruptions if the vaccine requirements at the U.S.-Canadian border continue," said John Kran, Michigan Farm Bureau national legislative counsel, in a statement to The Detroit News. "Simply put, this could not come at a worse time for agriculture. Michigan Farm Bureau strongly urges both the Biden Administration as well as the Canadian government to work toward a long term solution that allows goods to be transported freely across the border without disruption.”
Chuck Lippstreu, president of the Michigan Agri-Business Association, represents businesses that support farmers, including feed mills, agricultural retailers and logistics companies that haul food ingredients, crops and food products. He says this is a "no-win situation" for trucking companies that are already burdened by a shortage of drivers.
"They're doing their very best to overcome the logistical challenges," he said. "But at the end of the day, it's simple math. You have to have enough drivers available to do the work and right now that's really a challenge for these companies. Unfortunately, we're going to see that reflected in product availability at the store and ultimately consumer prices."
Canadian importers rely on trucks to transport fruit that arrives from South America to ports in the northeastern U.S. A shortage of global containers and truck drivers is already causing shipping delays of as long as two weeks and having fewer available truckers will likely make things worse, said Larry Davidson, president of North American Produce Buyers Ltd. in Toronto.
The weekend before the vaccine mandate took effect, the company had only one truck available to pick up 75,000 boxes of grapes in Philadelphia, he said.
“Thirty-six of 37 loads that were ready for pickup had to wait four or five days,” said Davidson, whose company ships produce across Canada. “We’re seeing the domino effect just continue.”
The real issue affecting the supply chain is not the vaccination requirement at the Canadian border or efforts to reconfigure trucker schedules to follow the new rules, said Erik Gordon, a professor at the University of Michigan's Ross School of Business. Rather, it's the pandemic's persistent effects on worker availability.
"The thing to be working on is not bellyaching about Canada not wanting people who are unvaccinated coming over," he said. "We've got to redesign manufacturing and distribution processes to be a lot more flexible in terms of the number of people who show up on any day, and who they are, what are they trained in. Because even if we go through a three-year cycle of these variants, eight years from now, there'll be a new thing and it'll start over again."
Detroit News Staff Writer Kalea Hall and Bloomberg contributed.