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Cross-border LTL Q&A with FreightPlus SVP

AskWaves looks at the intersection of reshoring and LTL with Curtis Garrett

AskWaves looks at cross-border LTL shipping. (Photo: Jim Allen/FreightWaves)

Cross-border freight flows have been increasing for years but interest around shipping from Mexico and Canada into and out of the United States has amplified since the pandemic. Many companies are rethinking their supply chains given issues sourcing product abroad, with some looking to bring manufacturing closer to end markets in North America. As this occurs, supply chain managers will continue to search for ways to effectively ship goods into the country, including less-than-truckload delivery. 

Mexico’s Maquiladora structure allows foreign companies the ability to import goods and materials into Mexico for assembly or manufacturing while avoiding duties and valued-added taxes.

“As U.S. and Canadian companies turn more Mexican facilities online due to an abundance of cheaper labor, there will be much more cross-directional traffic moving across both the north and south U.S. borders,” Curtis Garrett, senior vice president at FreightPlus and founder and chief creative at Understand LTL, told FreightWaves.

FreightWaves: What does the LTL cross-border shipping process look like? What are some of the differences?

Garrett: Shipment pricing particulars like class, base rates, discounts and minimums follow normal U.S. guidelines and pricing, which are much different that domestic shipments in Canada and Mexico.

Pricing freight in Canada is typically based on hundredweight and pallet rates. This prevents the need to drill into classifications and pay licensing for carrier or neutral base rates like in the U.S. LTL world. In some ways, however, Canadian and Mexican LTL is less evolved and less complex than where we are in our country. That’s both a pro and a con in my opinion.

The extra layer of complexity in cross-border LTL exists because of the specific paperwork, customs clearing requirements and an additional party [a customs agent] being involved. There are more parties involved, potentially creating bottlenecks.

FreightWaves: Do U.S. carriers want to be involved with cross-border shipments?

Garrett: Yes, from what I’ve seen in the U.S. LTL market, most carriers, particularly those with strong Canadian or Mexican partnerships, are actively seeking more cross-border business. This is partially due to the excellent handoff networks they’ve created with their counterparts in either country. They either have pickup or delivery cost eliminated in the transaction, and being the larger party in the deal they can negotiate favorable rates with Mexican or Canadian carriers.

FreightWaves: It seems like rail and full truckload have dominated the cross-border freight market. Why is LTL becoming more popular?

Garrett: It’s true that quite a bit of consolidation of freight happens at warehouses on either side of the borders, which is why historically full truckload has thrived more. This will continue on some level — however, the need for just-in-time and a more nimble supply chain will also grow and cross-border North American freight is no exception. LTL carriers — if proven to provide a similar service, priced well with low friction to the customer — will be used more often.

FreightWaves: What do the economics look like for carriers?

Garrett: Shipment complexity and a smaller pool of capable carriers presents an opportunity.

A lot of the larger U.S. national carriers actively pursue cross-border freight. It tends to operate well for them, and according to most pricing programs, the rates are quite aggressive for freight to certain Canadian provinces and places in Mexico.

FreightWaves: Do you have to be a participating carrier in the Customs and Trade Partnership Against Terrorism (C-TPAT)? 

Garrett: Not technically, but to be a serious player, yes. Most of your larger regionals and national LTL carriers are all C-TPAT members. This helps speed things up.

FreightWaves: Who are some of the LTL carriers with notable cross-border operations?

Garrett: Large Canadian carriers like Speedy Transport, Manitoulin Transport, Day & Ross and Midland Transport specialize in cross-border LTL freight. Almex is the largest LTL carrier in Mexico.

In the U.S., most of the national LTLs and some of the regionals provide cross-border services by way of partnerships. Some of the LTL carriers best known for it are Estes, Saia, Old Dominion and XPO. Estes and Saia are two that really push for this business and both have knowledgeable professionals running their cross-border programs.

FreightWaves: How do the partnerships work?

Garrett: Most carriers rely on relationships with third-party carriers to provide an interline service, essentially relaying the trailers to a partner with appropriate operating authority at the border.

FreightWaves: Has reshoring had an impact on cross-border LTL freight yet or is it still too early?

Garrett: I believe it will — and we are just starting to see the impact of that. However, the next two to three years will really tell the tale here.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.