Experts Split Over Impact of Mexico Court Ruling
This story appears in the May 6 print edition of Transport Topics.
Trade experts assessing a federal appeals court’s recent affirmation of the United States’ cross-border trucking pilot program with Mexico could not agree whether it paved the way for a rush of new Mexican carriers.
Many said the April 19 decision by the U.S. Court of Appeals for the District of Columbia Circuit would have little effect.
Tom O’Brien, a transportation professor at California State University, Long Beach, did not foresee a large increase in participation. Border delays and related problems still make trade difficult, and the pilot program does not solve those issues, he said.
“It creates an environment that’s not particularly encouraging for truckers to engage in,” O’Brien said.
Martin Rojas, vice president of security and operations at American Trucking Associations, said Mexican carriers can establish American companies that are allowed to operate with few restrictions in the United States.
“That facilitates their cross-border movements rather than participating in the pilot,” Rojas said.
But Klint Alexander, a partner at Wyatt Tarrant & Combs and professor of international trade at the Vanderbilt University Law School, thought otherwise. He predicted the ruling would create a wave of Mexican carriers as well as a boom in demand from U.S. shippers.
“It’s possible that this decision by the Court of Appeals might trigger an increase in applications from Mexico,” Alexander said.
Overall, he said, the court’s decision provides more certainty and legitimacy to the program, spurring more participation among Mexican fleets.
The cases, argued in December, were filed by the Teamsters union and the Owner-Operator Independent Drivers Association against the Obama administration seeking to block the government’s plan to allow Mexican trucks into the United States. It challenges an agreement the administration signed with Mexico to end a longstanding ban on Mexican trucks entering the United States.
Nafta, which was signed in 1994, let Mexican truckers do business in the United States. However, admission was blocked by congressional legislation. An arbitration panel eventually ruled that Mexico could take punitive measures — which it did in 2009, causing Mexico to implement $2.4 billion in annual tariffs on U.S. goods in retaliation.
During arguments in December, the Teamsters and OOIDA said the program, which started in October 2011, breaks multiple laws and illegally exempts Mexican carriers and drivers from U.S. regulations.
The two driver-interest groups promised to examine their legal options in the wake of the decision, and neither group had said it would take additional action as of last week.
Members of Congress blasted the court decisions but didn’t indicate whether they would take action against the program.
Reps. Duncan Hunter (R-Calif.) and Peter DeFazio (D-Ore.) said the court’s decision was bad for American workers and businesses.
Participation in the pilot program remains low. Only 10 Mexican carriers had been allowed into the program as of last week, compared with the 46 FMCSA has said it needs to accurately judge the safety of Mexican carriers.
Officials had completed only 934 inspections of Mexican trucks under the program as of last week. An inspection is completed each time a Mexican truck in the program crosses into the United States.
The agency said it needed 4,100 inspections to make a safety judgment.
Usually, fleets from each country can bring loads only to the border, where the load must be switched to another carrier. But Vanderbilt University’s Alexander maintains that will change as more Mexican fleets will apply for the program due to the ruling.
In addition to requiring truck access, Nafta also ensures that Mexican carriers can own U.S.-based companies.
“Mexican carriers have availed themselves of the investment provisions of Nafta, which allow them to establish a U.S. trucking company for the purpose of transporting international cargo, and thus provides them the ability to have cross-border operations with their U.S. subsidiary,” Rojas said.
Establishing a U.S. company also removes the requirements of the pilot program, such as additional audits and investigations by U.S. officials.
Initially, participating in the pilot program might seem obvious for Mexican carriers, but crossing the border still presents other problems, O’Brien said.
He pointed to problems such as delays, bottlenecks and the two governments not sharing data that could reduce wait times.
“The less encumbered a driver is going to be, the better, from his perspective. The pilot program only takes things so far,” he said.
