July 18, 2011 8:45 AM, EDT

Doubts Rise on Participation in Mexico Border Pilot Plan

By Eric Miller, Staff Reporter

This story appears in the July 18 print edition of Transport Topics.

U.S. regulators and U.S. truckers who do business in Mexico said they are skeptical that Mexican carriers will participate in the cross-border trucking program in large numbers when the pilot project gets into full swing in the next 60 days.

Because only 29 Mexican companies participated in a 2007 cross-border pilot program, Federal Motor Carrier Safety Administration officials said they are concerned that interest in the new pilot program will be limited.

And some U.S. truckers who do business in Mexico said the barriers for Mexican carriers to do longhaul operations in the U.S. are numerous.

“The notion of a Mexican trucker hopping in his truck in Mexico City and hooking onto an automotive shipment going into Detroit — just driving straight through — is not reality,” said Troy Ryley, Mexico managing director for third-party logistics provider Transplace. “If he doesn’t have a load coming back, it’s not going to be economically feasible.”

A reciprocal agreement authorizing the three-year pilot program and bringing the United States into compliance with the 1994 North American Free Trade Agreement was signed by U.S. and Mexican officials earlier this month. As part of the agreement, on July 8, Mexican officials immediately cut in half $2.4 billion in retaliatory tariffs on 89 U.S. products shipped to Mexico.

FMCSA officials say they need about 41 carriers to participate in the pilot to compile a statistically valid sample to evaluate the program’s effectiveness and to disprove the notion that Mexican trucks and drivers may not be as safe as their counterparts in the United States.

During the 2007 pilot, abruptly shut down by Congress in 2009, Mexican carrier participants made 12,516 trips into the United States. However, only 1,439, or 11.5%, were to destinations beyond the current 25-mile commercial free trade zone, according to a Congressional Research Service report on the Mexican trucks pilot.

“Only 4% of these longhaul trips (a total of 80 trips) were to destinations beyond a border state,” said the CRS report.“Almost all of the trips beyond the border commercial zone were to destinations within Texas and California.”

In a July 14 letter to customers, Dave Akers, vice president, Mexico, for C.R. England Global Transportation, the largest refrigerated carrier servicing the country, said the company supports the pilot but recognizes that Mexican carriers wanting to enter the United States face many challenges.

“We believe that only the most capable Mexican carriers in the market will be positioned to do so,” Akers said.

Akers said that in meetings held with the company’s Mexican carrier partners “expressed that the possible operational barriers to entry into this program are the exposure to very expensive lawsuits in the U.S., the cost of insurance, new tractor EPA requirements, driver training, access to backhaul freight returning to Mexico, and certain challenges pursuant to the language barrier.”

Former FMCSA administrator Annette Sandberg, now a Spokane, Wash., transportation attorney, is so sure Mexican carrier participation will be slim that she made a bet with John Hill, another former administrator, that fewer than 40 Mexican carriers will register this time around.

“I just think that there’s too much uncertainty,” Sandberg told Transport Topics. “The Mexicans can see what’s going on at the Hill already. This is like the third time that FMCSA has tried to do this and have had political folks try to block it.”

Not only is Congress threatening to eliminate funding for the FMCSA’s controversial purchase of electronic logging devices for Mexican trucks, but also the Teamsters union and the Owner-Operator Independent Drivers Association are fierce opponents of the pilot. After the agreement was signed, OOIDA asked a federal appeals court to review the validity of the pilot.

The CRS study said the intent of the NAFTA agreement was to allow Mexican and U.S. trucks to make deliveries across borders more easily and efficiently.

Although the current system of short-haul “shuttling” of goods from Mexico across the border to commercial zone distribution warehouses or carrier yards has been dubbed as inefficient, many believe there is a lack of economic incentives to bypass the current system with longer hauls into the U.S. interior.

The shuttle carriers are usually owner-operators using older equipment and are normally hired by Mexican customs brokers or freight forwarders,” the CRS study noted.

“The economic rationale for granting longhaul authority is to allow for use of one truck instead of as many as three for longhaul shipments between Mexico and the United States,” said the CRS report. “However, border wait times can negate any potential advantage gained by displacing shorthaul equipment with longhaul equipment.”

“In some cases, sunk investments in warehouses near the border for packaging or transloading operations could reduce the attractiveness of utilizing Mexican longhaul trucks in the United States,” the CRS report said.

Although congressional approval is technically not needed to begin the program, FMCSA must wait for the Department of Transportation’s inspector general to issue a report on the agency’s readiness for the program.

Before the first Mexican carrier can gain provisional authority, a number of conditions must be satisfied, said a Department of Transportation spokesman.

FMCSA must receive and pro-cess applications from potential Mexican carriers, and each Mexican carrier must pass a pre-authority safety audit.

Also, FMCSA must publish the results of the pre-authority safety audits in the Federal Register and accept comments for up to 10 days.

The entire process is expected to take from 45-60 days, said the DOT spokesman.