A long-running dispute might be reignited in the near future thanks to the trade deal reached between the U.S., Mexico and Canada. Officially called the United States-Mexico-Canada agreement (USMC), the deal is supposed to replace the North American Free Trade Agreement. Assuming ratification of the deal, the three countries should be able to get back to more normal trade relationships soon.
While most of the deal is an update to NAFTA, there is a paragraph inserted into the agreement that could disrupt cross-border trade via truck.
Annex II of the agreement includes a Land Transportation section that states:
“Notwithstanding Annex I-US-8, the United States reserves the right to adopt or maintain limitations on grants of authority for persons of Mexico to provide cross-border long-haul truck services in the territory of the United States outside the border commercial zones if the United States determines that limitations are required to address material harm or the threat of material harm to U.S. suppliers, operators, or drivers. The United States may only adopt such limitations on existing grants of authority if it determines that a change in circumstances warrants the limitation and if the limitation is required to address material harm. The Parties shall meet no later than five years after the entry into force of this agreement to exchange views on the operation of this entry.”
There is also no reciprocal language for U.S. trucks entering Mexico.
While the section doesn’t implicitly state that the U.S. would halt the current cross-border trucking program, which allows approved Mexican-based carriers to operate outside the current commercialized zone along the border, it does seem to suggest that the U.S. could end the controversial program if it chooses.
That would be a departure from where the two nation’s stand and a win for the Teamsters and other anti-Mexican trucking groups. There is speculation in some circles that once the agreement is formally approved, the Teamsters may make a renewed push to get Mexican trucks off U.S. roads for good.
The Teamsters did not respond to a FreightWaves’ request for comment on the provision.
The Owner-Operators Independent Drivers Association (OOIDA), is supportive of the language. OOIDA spokesperson Norita Taylor issued the following statement to FreightWaves on the language. “We support the current annex language and will watch to see if it remains,” she said.
Cámara Nacional del Autotransporte de Carga (CANACAR), the Mexican equivalent of the American Trucking Associations, also did not respond to a request for comment, but reports out of Mexico are that the group is lobbying the incoming government of president-elect Andrés Manuel López Obrador to ensure that the status quo remains for Mexican trucks. Lopez Obrador takes office on Dec. 1. The U.S. and Mexico want to get the deal officially approved before then.
Under current rules, that were settled following several starts and stops, lawsuits, and tariffs, authorized Mexican trucks are allowed to travel into the heart of the United States to move loads. They then must immediately leave the U.S., although they can reload at their destination point. The ability of Mexican trucks to operate in a commercialization zone along the border remains unaffected.
If the new deal ultimately results in a cancellation of the long-haul Mexican truck program, it could cause disruptions in the supply chain, in part because of the complex process of moving cross-border freight, and in part because both the U.S. and Mexico are facing a lack of drivers.
Typically, freight that moves across the border is brought to the border by a Mexican carrier and the trailer is transferred to a U.S.-based carrier, but not all freight moves are like that. In 1999, 4.3 million Mexican trucks cross the border into the U.S. By 2008, that had risen only to 4.8 million. The majority of those remained in the commercialization zone. In 2017, there were 6,039,774 total truck crossings between the U.S. and Mexico.
“Because of the lack of drivers on both sides, this is a business model that has grown over the last several years,” explains Jose Minarro, managing director of Mexico for Transplace. “Border companies have lost quite a number of drivers.”
Minarro says uncertainty is the current situation. “We don’t have the full details,” he says. “We do know that the treaty is coming with a safeguard from the U.S., but not from Mexico.
“The Mexican carrier community feels that was one of the trading cards used in the negotiation,” Minarro adds. “The real concern is that the moment the new deal is signed, the Teamsters will [start a campaign to end the program]. It would be hard to believe, though, that something like this would happen in this environment [of freight demand and driver shortages].”
The history of Mexican trucks
The ability of Mexican-domiciled motor carriers traveling on U.S. highways has been a long-debated and legislated affair. Back in 2007, the U.S. sought to solve a technical violation of NAFTA by allowing Mexican carriers to operate on U.S. roadways under the Cross-Border Trucking Demonstration project. At that time, and still to this day, Mexican trucks can operate anywhere within a 25-mile border zone, but they can’t leave that area.
The introduction of the demonstration project sought to correct what many said was a violation of free trade under terms of NAFTA. The U.S. lost a court battle over it and the demonstration pilot was the result. It was heavily criticized by those who claimed that Mexican carriers were unsafe, drivers were not qualified, and they would take U.S. truck driving jobs.
At the conclusion of the three-year project, which ended in 2014, Congress declined to fund a permanent program, effectively ending the ability of Mexican trucks to haul goods much inside the border regions. Mexico retaliated with a $6 billion and over $2 billion in tariffs on U.S. goods, mostly agricultural products.
Eventually, the two countries reached a settlement that allowed approved Mexican carriers to operate in the U.S. assuming their vehicles and drivers met all U.S. regulations, including driver drug testing, as of 2015. The vehicles were even required to have electronic logging devices installed before they were mandated for U.S. carriers.
While that seemed to settle things down, it has not ended the fight for groups like the Teamsters and OOIDA, even though Mexican carriers seem to be performing better than their U.S. counterparts when it comes to inspection data.
According to FMCSA inspection data, in Fiscal Year 2017, the agency inspected 7,978 Mexico-domiciled long-haul trucks (those operating outside the 25-mile commercial zone) and placed 12.36% of vehicles out-of-service and 0.61% of drivers out-of-service. In contrast, there were 3.4 million U.S. vehicles inspected with 20.57% vehicles placed out-of-service and 5.08% of drivers placed out-of-service due to violations.
Mexico has long sought the same consideration that is given to Canadian carriers. Under NAFTA, Canadian carriers are allowed to bring loads into any part of the U.S., but they can’t pick up a load in the U.S. and deliver it to another destination within the U.S. The current program with Mexico, agreed to in 2011, allows Mexican carriers the same rights.
To date, only 41 Mexican carriers have applied for and been accepted into the program. The largest carrier, Trans-Mex Inc. has 188 vehicles and 255 drivers in the program. Only two other carriers, Transportes Olympic De Mexico, with 78 vehicles and 78 drivers, and GCC Transporte SA, with 50 vehicles and 39 drivers, have more than 21 vehicles involved. Twenty-two of the carriers operate fewer than 3 vehicles.
Those Mexican carriers, though, are facing the same problems as U.S. carriers when it comes to filling driver seats, and that is what Minarro says is most concerning should the U.S. cancel the cross-border program, and what will impact companies like Transplace who move goods across the border.
“We struggle to find capacity and drivers everyday,” he says, “especially outbound, northbound … that’s where you are fighting with the same four of five shippers for capacity.”
If Mexican carriers can no longer drive deep into the U.S. with goods, that will require more U.S. drivers to move freight away from the border, Minarro notes, outside of any related impacts that may occur, such as Mexican again slapping tariffs on U.S. agriculture exports. It will require a major reworking of the logistics of cross-border freight movements.
“My concern … that this pool of drivers has been forming or developing over the past five years,” Minarro points out. “And it has been developing because of the lack of drivers [in the U.S.].”
A rewrite of trucking rules could undo all the coordination that logistics providers have created in recent years to make border freight move smoother.