Since the North American Free Trade Agreement (NAFTA) entered into force in 1994, U.S. exports to Mexico have risen in value from $41.6B to a peak of $241B in 2014, before declining to $144.6B in 2017. According to Department of Transportation data, in 2017 more than two million trucks crossed the border at Laredo, Texas, alone.
But the instability and organized crime on the Mexican side of the border brought a spike in cargo thefts this year, with a 108% increase in cargo thefts in the first quarter. There were 3,346 cargo thefts in the first quarter according to Sensiguard, and 92% of the thefts occurred while the goods were in transit.
The bilateral trade relationship between the United States and Mexico is extremely important, but moving goods across the border is still much more complicated and expensive than it should be. One pain point familiar to freight brokers looking to move loads into Mexico is quickly and cheaply securing insurance coverage. Trucks headed for Mexico arrive at transloading facilities near border crossings like Laredo at unpredictable times, often at night or on the weekends. Then brokers have to procure Mexican cargo insurance at the last minute, a process that involves frantic phone calls to customs brokerages and insurance agents who may not be open or have coverage available when the broker needs it.
Brokers have to rely on a chain of middlemen who each add their own margin to the cost of the insurance, making it expensive on a per load basis. Typically, a broker who hires a Mexican carrier to transload a shipment at the border and take it into Mexico buys insurance from a carrier, who gets it from a customs brokerage, who bought it from an insurance agent, who is paying an underwriter. The convoluted chain of intermediaries inflates the cost of Mexican cargo insurance for a load valued at $100K from the $150 paid by the customs brokerage to about $350 paid by the 3PL or freight forwarder and $500 paid by the shipper customer.
Mark Vickers has created a solution—Borderless Coverage—that both automates the process of acquiring Mexican cargo insurance and halves the cost for freight forwarders, brokers, and 3PLs. Vickers is a veteran broker who ramped up TQL’s Mexico business before going to work at MacroPoint. In a phone conversation with FreightWaves, Vickers described the difficulty he faced in trying to drive down spot rates in Mexico.
“I was at TQL, a broker, working with companies in Mexico and Laredo and McAllen for seven to eight years, a business that was very profitable on the U.S. side. I would hire Mexican carriers to take care of the Mexican side and transload it, and that’s a pretty standard practice, but I had a hard time competing in that market and couldn’t figure out why. How were people getting lower rates?” said Vickers.
“I looked at rates that customs brokers were charging 3PLs,” said Vickers, “who were then passing them along. Mexican cargo insurance is very expensive to begin with on a per load basis, and every party that touched the shipment added a margin to the Mexican cargo insurance component of each load.”
Vickers eventually got his insurance license and worked on obtaining underwriting for about a year before finally making Borderless Coverage available. “What differentiates Borderless Coverage,” he said, “is that there was no way for brokers, shippers, 3PLs, and carriers to come to one market to purchase Mexican cargo insurance in an automated fashion. Right now people are either self-insured or are going through multiple parties to obtain Mexican cargo insurance. I created one platform called Borderless Coverage where they can obtain quotes on a per load basis—they don’t have to contact insurance agents, they can just go into the site and click a button.”
Borderless Coverage uses Falvey Shippers' Insurance API to plug directly into a broker’s TMS so that a button appears that will automatically generate the per load quote and add it to the rate. Customers that don’t have a TMS can get a unique link or log directly into the Borderless Coverage website.
Besides allowing brokers to cover more loads moving into Mexico and cut the cost and labor of acquiring Mexican cargo insurance, Borderless Coverage also allows brokers to turn what had been a cost into a new source of revenue. Brokers can now offer their shipper customers Mexican cargo insurance and mark up their own margin on it--as long as they're properly licensed--and because the other intermediaries (Mexican carriers, customs brokerages, insurance agents) have been eliminated, it would still be less expensive for the shipper than the current system.
Local government officials on both sides of the border have praised Borderless Coverage for reducing friction and costs associated with cross-border trade between Mexico and the United States; it’s an example of how technology can bring greater transparency to price discovery, disintermediate middlemen, and drive costs downward, which makes doing business easier and encourages trade growth.