Mexico remains one of the United States' most important trading partners, with nearly 490 billion in total goods traded (import and export) in 2015, according to U.S. Census data. Our south-of-the-border neighbor ranks third in trading volume behind China and Canada.
While the North American Free Trade Agreement (NAFTA) has made it easier to do business with Mexico, new sophisticated manufacturing capability within the country, the booming automotive sector (see sidebar), and higher labor rates in China will further increase the volume of imports from Mexico, especially as more local sourcing becomes advantageous for many U.S. businesses. Instead of waiting weeks for goods to arrive overseas, a shorter supply chain from Mexico means products can arrive in just days, reducing inventory requirements and shipping costs.
As U.S. manufacturing plants and other companies ramp up business with suppliers in Mexico, trading across the border still poses many challenges. Customs procedures have advanced in the United States and Canada to a fully electronic system, where entries can be processed in seconds. Mexico remains more paper- and procedure-oriented, especially on southbound routes, which may result in longer processing times and efficiency challenges.
Security issues, divergent custom rules and multi-party interactions throughout the supply chain may cause delays, increased costs and potential loss of freight.
Companies importing and exporting from Mexico can still take some precautionary measures to protect and improve their supply chain operations.
Heighten Your Own Security to Protect Assets
Security in some of the more volatile areas of Mexico is one of the biggest challenges. Occasionally, shipments in high crime or high risk areas along the border are hijacked for goods and parts.
In recent years, security has improved due to modernization of land ports of entry along northern ports and new initiatives to secure borders. However, as these types of programs continue to evolve, global transport, logistics and supply chain companies need to optimize their security stance by conducting risk assessments and establishing internal security policies.
Weighing cargo before and after its arrival can determine discrepancies, alerting when new loads have been added that might not be visible. While adding expense and time to supply chain operations, additional internal and external security measures should be considered a necessary part of doing business south of the border.
Shippers may benefit from tax advantages on imports and exports through bonded warehousing that allows users to move goods into Mexico without officially importing them. Generally located near a port, bonded warehouses store cargo while the shipper keeps the title to goods. Companies delay duty, taxes and other fees until cargo is moved out for customer delivery.
Many logistics service providers maintain bonded warehouses as part of their supply chain services. Some maintain bonded warehouses in both Mexico and the United States, and offer such services as logistics space for storage, inventory administration and control as well as packing, labelling and consolidation.
Freight Consolidation Makes LTL Shipments Easier
Less-than-truckload (LTL) is not an optimum method of shipping products into Mexico, but sometimes it's unavoidable. LTL shipments are received at a different area at the Mexican border, and then processed through various parties before consolidated into a full truckload shipment. As cargo goes through various steps, such as unloading, customs processing, possibly storage and then reloaded onto a truck, freight visibility and accountability could be lost along the chain of events.
Freight consolidation of LTL shipments prior to their arrival at the Mexican border offers an opportunity to reduce costs and border complications. By combining shipments into a full truckload, shippers can reduce the number of hand-offs and associated problems and costs. While companies may not have enough volume of their own to make a full truckload, freight consolidators can combine their cargo with others for greater economies of scale and less handling over the border. Or, companies can combine daily LTL shipments into weekly truckload dispatches.
Shippers can also consider air freight to Mexico for smaller loads up to several thousand pounds to reduce custom delays and complications. Interior destinations such as Monterrey and Mexico City have more simplified clearance processes than border locations like Laredo, Texas. However, large volumes of cargo are shipped much more economically by truckload.
Gain Necessary Expertise from a Qualified Partner
The cost and complexity of cargo transport into and out of Mexico may discourage companies with insufficient supply chain strategies and limited resources to take advantage of the growing opportunities in trading across the border. Working with a knowledgeable logistics service provider can provide the necessary expertise in managing the challenges associated with shipping across the border.
Familiarity with each country's unique import and export laws and customs as well as product compliance in regards to product weight, size and labeling goes a long way in reducing risk and easing the border-crossing process. Having relationships with contract partners along the border, such as logistics service providers, can help expedite cargo transport. Established processes and transportation management technology support intelligent management of the supply chain.
Many logistics service providers offer warehousing for efficient procurement and distribution of goods. These logistics experts have first-hand experience in navigating the best cross-border solutions based on their clients' needs and resolving or avoiding potential problems. Whether you need support just at the border or from pickup to customer delivery, a logistics service provider may be the best and most cost-effective option for you.
Frank Guenzerodt is president & CEO of Dachser USA Air & Sea Logistics Inc., a logistics service provider.