Cross-Border Best Practices During President Trump's Trade Policy Uncertainties

More than $400 billion in freight crossed in both directions through the United States-Mexico border by truck in 2018. In Laredo, Texas, alone, more than two million trucks carried goods across the border last year.

While President Donald Trump's trade wars with Mexico and China have destabilized business markets, industry professionals said business along the border is still moving. 

Mark Vickers, chief executive officer of Cleveland-based Borderless Coverage, said "Trump is going to do what he needs to do in regards to immigration – but business down on the border still has to go on."

Michael Scalzo, executive vice-president and chief financial officer of Montreal-based Vitesse Trucking Services, said keeping up with the changing political climate between Canada, the United States and Mexico is something that takes more time than it used to.

"We are watching the news closely, obviously, we are very much affected by the currency with cross-border shipments- its still okay right now, but things are a little slower than usual," Scalzo said. 
 

Vickers told FreightWaves that issues faced by the freight industry in Mexico include insurance discrepancies; lack of visibility of freight when it is in Mexico; and distribution centers, cross-dock and transloading facilities in Laredo that must be optimized in order to keep up with the increase of trade. 

"When it comes to Mexico, when it crosses the border, you never know where anything is at –  no one has adopted the technology needed," Vickers said. "It's important for companies participating in cross-border trade to adopt technologies at the border and in Mexico that have long been known as best practices in the U.S. and Canada." 

Every shipper, carrier and broker has heard the horror stories of moving freight across Mexico – cargo theft, robbery, police corruption and kidnappings.

From December 2018 to the present, there has been an increase of more than 70 percent in the theft of cargo transportation; between 80 to 100 truck thefts a day throughout Mexico, reports the Mexico City-based National Chamber of Freight Transport (CANACAR).

To make matters more complex, freight from Mexico may be touched by as many as six different entities, including the Mexico shipper, the Mexican yard, Mexican customs, U.S. customs, U.S. yard and U.S. consignee.

The first and most underestimated step for shipping freight to Mexico is often the paperwork – bill of lading, commercial invoice, packing list, shipper's export declaration and NAFTA certificate of origin.

"Incomplete or incorrect paperwork is a common reason shipments get delayed at the border, and it's very avoidable," according to a blog post by David Henry, regional manager for Mexico at third-party logistics company GlobalTranz. "Make sure you provide your logistics partner with accurate shipping addresses, piece counts, pallet counts, details about the items being shipped and timelines."

Vickers said insurance is one of the biggest differences between Mexico and the U.S. when it comes to shipping freight – and one of the biggest risks.

"The first big piece would be the Mexican government; it is hard to enforce insurance coverage in Mexico when the laws are so different," Vickers said. "Make sure your freight is covered."

Under the North American Free Trade Agreement, cross-border shipments between the United States, Canada and Mexico are subject to the cargo liability requirements of the nation of origin. 

In Canada, cargo loss or damage is covered at $2 per pound outbound, while in the U.S. carriers could be liable for up to the full amount of the freight loss.

"The Mexican government only requires carriers for $0.025 per pound liability on load volume, so if there is $100,000 in product inside your truck, and that shipment turns over and it is a full bad loss – that truck is only going to get indemnified for $2,000," Vickers said. 

Last year, Vickers founded Borderless Coverage, which offers clients a direct, automated way to buy niche insurance when they need it, offering an application that integrates directly into a shipper's own system. Customers get a guaranteed rate for that insurance when they're approved as a client, Vickers said.

For Vitesse Trucking Services, the majority of their business is cross-border shipments, "from Canada to the United States, the U.S. to Mexico, Mexico to Canada, all day long, that's what we do," Scalzo said. 

Vitesse was one of the first carriers to use Borderless Coverage for its client's cross-border shipments.

"My sales team is telling me clients are demanding shipments with value, they are putting their value on the shipments, in general, shipments are based on $2 a pound (unless the value is written on the bill of lading)," Scalzo said. "With this Borderless Coverage, you have the value, you plug it into technology, you get a price,  everybody is covered you move on, so it makes it a lot more effective."

Other tips include using a transportation management system (TMS) in cross-border shipping to provide end-to-end visibility, tracking and connectivity among all parties involved.

"When it comes to warehouses, cross-docks and infrastructure, Laredo and Mexico are just a little slower to adopt technologies that are fully adopted in the U.S. and Canada right now," said Vickers, who used to work for visibility solution provider Descartes MacroPoint and continues to work for Sedlak Supply Chain Consultants.

Some other cross-border tips include working with carriers that are part of a program called Customs Trade Partnership Against Terrorism (CTPAT), Henry said.

"U.S. Customs and Border Protection (CBP) launched its CTPAT program in 2001, in the aftermath of 9/11. CTPAT is a voluntary public-private sector partnership program for importers, carriers, consolidators, customs brokers and manufacturers," Henry wrote in a blog titled "5 Tips to Simplify Cross-Border Mexico Logistics."

"The bottom line for shippers is when you hire companies that are in the government's CTPAT program, you lower your risk. CTPAT members are also less likely to be slowed down by CBP at U.S. entry points and will often experience shorter wait times at the border," Henry said.

Another tip would be to "increase your lead time" for freight moving through Mexico, Henry said.

"A 1,000-mile load going from state-to-state in the U.S. won't have the same transit time when shipping into Mexico. Everything slows down at border crossings for routine customs clearance procedures," Henry said. "The more lead time your logistics partner has to book a shipment, the more leverage they have to secure the best carrier for your lane, identify efficiency improvements, negotiate rates and accommodate delivery timelines."

Image sourced from Pixabay