Unraveling the open border controversy

June 8, 2004
Unraveling the open border controversy In an election year dominated by such contentious topics as homeland security, outsourcing and the economy, it's

Unraveling the open
border controversy

In an election year dominated by such contentious topics as homeland security, outsourcing and the economy, it's no surprise that border crossings are again coming under scrutiny. The U.S. Supreme Court recently heard oral arguments in a case that overturned a lower court ruling supporting President George Bush's decision to open the border and allow Mexican trucks access to the U.S. beyond the 20-mile zone.

Herb Schmidt, president of truckload carrier Contract Freighters Inc. (www.cfi-us.com), says he's satisfied with access the way it was, and we'd all gain more by streamlining the border crossing process.

“The whole ‘open border' idea has been oversimplified and the argument has been exaggerated with respect to the damage it would do to either or both countries,” says Schmidt. He suggests streamlining customs clearance, working on better identification, electronic verification, better communication between Mexican and U.S. customs, and more thorough but quicker inspections.

“There is so much we can do to expedite and reduce the cost of transportation without just looking at the labor angle,” Schmidt continues, referring to concerns that allowing Mexican drivers into the U.S. would somehow flood the market with cheap labor.

“We don't see a great influx of equipment from Mexico in the U.S. as everyone had anticipated and feared,” says Schmidt. Most Mexican carriers CFI deals with are busy coping with survival in their own economy. They don't have the capital to invest to expand into the U.S.

Among the restrictions facing any Mexican carrier considering a significant push into the U.S. is the lack of cabotage rights — Mexican carriers bringing a load into the U.S. cannot provide transportation services within the U.S. They can only pick up an international load and return to Mexico. The situation is similar for a U.S. carrier operating in Mexico or, for that matter, Canada.

Lack of cabotage rights drives up the costs for any carrier coming into the U.S. market because they can't take a load to reposition equipment for that international shipment that will get them back across the border, Schmidt explains. Mexican carriers are also very regional in their operations, he adds. They don't cover the entire country the way a U.S. carrier like CFI provides service throughout the U.S.

It's very difficult for a Mexican carrier to move a shipment into the interior of the U.S. unless it is on a dedicated, closed-loop arrangement that will provide a backhaul. “If they happen to bring a load through Nuevo Laredo/Laredo and have a return load that goes through El Paso/Juárez, they still have a problem because they're headed to Chihuahua and there's not good access back over the mountains,” Schmidt points out.

Schmidt uses CFI's own experience in Canada as an example. CFI moves loads into Canada on its own trucks, but in the 20 years he has been with the carrier, that business has not grown beyond 4% of its total volume, and the U.S. has had an open border with Canada for years. In Mexico, CFI hands off trailers to its Mexican partners and, where CFI doesn't have a return load, the Mexican carrier works to find a northbound shipment and load it onto a CFI trailer that CFI will deliver. It's a win-win, says Schmidt.

Though regulatory restrictions on U.S. ownership of Mexican carriers have changed under terms of the North American Free Trade Agreement (NAFTA), there are other barriers to U.S. carriers entering the market in a significant way. Some of the more basic issues center on language and culture. Then there are infrastructure issues, says Schmidt. Facilities are just not readily available in Mexico, and there are hurdles related to getting authority and permits to operate in Mexico. There are several departments in the Mexican government involved in that process, and it's still very bureaucratic, cumbersome and at times hopeless.

Mexican carriers looking northward face similar barriers in language and culture. They may find they are uninsurable in the U.S., not because of a poor safety record but because recordkeeping is different. Driver qualification and drug testing requirements don't match those in the U.S., leading Schmidt to observe that he'd be surprised if a U.S. insurance company would underwrite a Mexican carrier.

In the end, Schmidt doesn't expect a flood of Mexican trucks streaming across the border, even if the 20-mile rule is lifted. He will concentrate on CFI's partnerships with Mexican carriers as the most efficient and cost effective way to handle cross-border trade and will continue to urge both governments to focus on improving processes at the border to speed crossings and reduce costs. LT

June, 2004

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