Opinion: The Changing Landscape of Mexico-US Shipping

As final details emerge about the future shape and structure of the revamped North American Free Trade Agreement, one thing remains true: Change is coming.

Cervin

READ MORE: Trump clinches rebranded NAFTA as Canada joins pact With Mexico

News reports provide snippets of where and how this landmark agreement may change, and how those changes may impact industries, supply chains, jobs and how goods are made and consumed on both sides of the border. While it’s still too early to tell what a final agreement will look like, industry watchers expect changes to tariffs, trade policies and procedures, amended customs regulations and other changes that will impact businesses — and consumers’ wallets.

Regardless of the economic and political implications, there are key trends that importers, exporters, motor carriers and brokers should be concerned with — and actively managing — when it comes to cross-border shipping among Mexico, the United States and Canada:

Trade Flows

The nature of trade flows among Mexico, the United States and Canada are a continuous challenge for shippers and their transportation partners.

At Laredo, Texas, the busiest cross-border gateway, the vast majority of freight is coming from destinations deep inside of Mexico, and the trade breakdown is four-to-one; out of every five trailers crossing the border, four are loaded with exports from Mexico going north into the United States, with only one loaded trailer going south into Mexico.

On average, shipments transiting Laredo will have a length of haul within Mexico of somewhere between 400 to 500 miles. This reflects the significant investments companies have made to build manufacturing capacity deeper into Mexico’s interior. Other gateways, such as El Paso, Texas, and San Diego, have a similar situation. However, in the case of El Paso, most shipments originate or stay within about 200 miles of the border, so the transportation economics are not as challenging.

But the imbalance problem persists, and it’s getting worse.

For trucking companies and intermodal rail providers, it’s a huge challenge to cost effectively balance and stage equipment in these trade lanes so enough trailers are in Mexico at the right time to handle the higher volume of northbound exports. And the current tight freight capacity market is exacerbating the situation.

In earlier times, when capacity was more plentiful, carriers would “deadhead” trailers back into Mexico to reposition them for northbound export freight — at little or no cost to the exporter or importer.

Today, the tight capacity situation has flipped the script. To get equipment where they need it, exporters are more likely to have to pay much more of the cost to get that equipment repositioned, whether by truck or intermodal rail.

All this makes exports coming out of Mexico more expensive as transportation costs have risen.

Risk and Security

Managing risk and security is paramount. A top concern among importers and exporters is assurance that their freight will be secured.

The key to risk management in Mexico is finding the right partner in the country, with experience, resources and infrastructure to successfully manage cross-border freight.

The right partners include those with technologies — including satellite tracking, GPS, geofencing and more — to closely track and protect freight. They also have partners in Mexico with security departments to follow the shipments, and they measure transit against an expected timeline to confirm that the truck is stopping only at proper locations, and only for the prescribed amount of time.

Partner selection of the Mexican carrier and broker is critically important, as is having a high level of confidence they have the security protocols, resources and technology to track and protect shipments in Mexico.

Eliminating Paperwork Delays

Even in today’s world of electronic documentation and digital customs clearance processes, having accurate and complete paperwork supporting the shipment remains vitally important. Importers and exporters need to ensure all required documents are with the shipment, so the broker can swiftly process the product into the respective country, meeting all customs requirements and preventing any delay in clearance and transit.

The key to overcoming the documentation challenge: Engage an experienced broker or freight forwarder who has personnel and operations on both sides of the border. It’s critical for the broker clearing the shipment to be intimately familiar with doing business in the host country, be up to speed on applicable regulations and processes and be connected from a technology perspective with customs clearance systems.

It’s all about teamwork — among the importer and exporter, the carrier — and the selected customs brokers in the United States and Mexico. All must be joined at the hip, communicate aggressively and often, and work in lockstep to ensure goods are cleared properly and not delayed.

Regardless of the changes that occur with NAFTA, these fundamental business issues will continue to remain front and center for cross-border shippers. How well importers, exporters, brokers and carriers can collaborate and achieve true, mutually beneficial partnerships, and drive more efficiency into the cross-border trade process for all, will be the key to long-term success.

With more than 25 years of service, Cervin is experienced in finance, revenue management and sales, as well as CFI’s Mexico operations. CFI, a wholly owned operating subsidiary of TFI International Inc., has been a leading provider of 53-foot dry-van truckload transportation services in North America. CFI has operated in Mexico for 33 years.