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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
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16 East 34th Street, 4th floor---------------------- Stuart Basefsky
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Congressional Research Service (CRS)

 

North American Free Trade Agreement (NAFTA) Implementation: The Future of Commercial Trucking Across the Mexican Border

John Frittelli,Specialist in Transportation Policy

June 1, 2010

http://opencrs.com/document/RL31738/2010-06-01/download/1013/

[full-text, 32 pages]

 

Summary

NAFTA set forth a schedule for implementing its trucking provisions that would have opened the

border states to cross-border trucking competition in 1995 and all of North America in 2000, but

full implementation has been stalled because of concern with the safety of Mexican trucks.

Congress first addressed these concerns in the FY2002 Department of Transportation

Appropriations Act (P.L. 107-87) which set 22 safety-related preconditions for opening the border

to long-haul Mexican trucks. In November 2002, the U.S. Department of Transportation

announced that all the preconditions had been met and began processing Mexican applications for

U.S. long-haul authority. However, a suit over environmental compliance delayed implementation

further. After the suit was resolved, in February 2007, the U.S. and Mexican Secretaries of

Transportation announced a demonstration project to implement the NAFTA trucking provisions.

The purpose of the project was to demonstrate the ability of Mexico-based motor carriers to

operate safely in the United States beyond the border commercial zones. Up to 100 Mexicodomiciled

carriers would be allowed to operate throughout the United States for one year and

Mexico would allow the same for up to 100 U.S.-based carriers. With passage of the U.S. Troop

Readiness, Veteran’s Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007

(P.L. 110-28), Congress mandated additional requirements before the project could begin. After

failing to defund the demonstration project in the FY2008 Consolidated Appropriations Act (P.L.

110-161), Congress succeeded in terminating the demonstration project through a provision in the

FY2009 Omnibus Appropriations Act (P.L. 111-8). Subsequently, Mexico announced it would

retaliate by increasing import duties on 90 U.S. products. The Obama Administration has

indicated it intends to propose a revamped program that will address the concerns of Congress.

The FY2010 Consolidated Appropriations Act (P.L. 111-117) passed in December 2009 did not

preclude funds from being spent on a long-haul Mexican truck pilot program, provided the terms

and conditions stipulated in section 350 of P.L. 107-87 and section 6901 of P.L. 110-28 were

satisfied.

 

One truck safety statistic, “out-of-service” rates, indicates that Mexican trucks operating in the

United States are now safer than they were a decade ago. The data indicate that Mexican trucks

and drivers have a comparable safety record to U.S. truckers. Another study indicates that the

truck driver is usually the more critical factor in causing accidents than a safety defect with the

truck itself. Service characteristics of long-haul trucking suggest that substandard carriers would

likely not succeed in this market. As shipment distance increases, the relative cost of trucking

compared to rail increases, and thus shippers utilizing long-haul trucking are willing to pay more

because they require premium service, such as precise delivery windows or cargo refrigeration.

These exacting service requirements would seem to disqualify truckers with unreliable equipment

or incompetent drivers. In contrast, the short-haul “drayage” carriers that Mexican long-haul

carriers would displace, typically use older equipment because of the many hours spent idling

awaiting customs processing at the border. If Mexican carriers do eventually receive long-haul

authority, the short term impact is expected to be gradual as Mexican firms deal with a number of

stumbling blocks, including lack of prearranged back hauls and higher insurance and capital

costs, in addition to the customs processing delays. In the long run, use of drayage companies is

likely to decline as they lose part of their market share to Mexican long-haul carriers. The most

common trips for these carriers will probably be from the Mexican interior to warehouse facilities

on the U.S. side of the border or to nearby cities in the border states.

 

Contents

NAFTA’s Commercial Trucking Provisions: Background and Implementation History ................1

Demonstration Project Results after One Year .......................................................................5

Truck Safety Linkage to Service Characteristics ..........................................................................6

“Long-Haul” Trucking Defined.............................................................................................6

Short-Haul Trucking over the Border ....................................................................................7

Determinants of U.S. Truck Safety and Applicability to Mexican Carriers .............................8

Mexican Truck Out-of-Service Rates Comparable to U.S. Trucks ..........................................9

Cross-Border Trucking Operations: An Overview...................................................................... 11

The Scope of Cross-Border Truck Traffic ............................................................................ 11

Cross-Border Commercial Trucking: The Trade Flow Process .............................................13

Mexico-U.S. Crossings .................................................................................................13

U.S.-Mexico Crossings .................................................................................................14

The Maquiladora Exception ..........................................................................................15

Hazardous Materials and Agricultural Trade..................................................................15

The Border’s Distinctive Institutions: Drayage and Mexican Customs Brokers ....................16

Drayage: Deadheads and Bobtails .................................................................................16

Mexican Customs Brokers ............................................................................................17

Traffic Congestion ..............................................................................................................18

Mexican Trucks Illegally Operating Beyond the Border Zone..............................................18

The Outlook for Commercial Trucking Under NAFTA.............................................................19

The Short Term: Expectations and Limitations ....................................................................19

The Short Term Prospects for Mexican Long-Haul Trucking in the United States ..........19

The Short Term Prospects for U.S. Long-Haul Trucking in Mexico ...............................21

The Short Term Outlook................................................................................................21

The Long Term: Business Structure and Competition ..........................................................22

The Cross-Border Business Paradigm............................................................................22

The Low Cost Producer: Time and Distance Is Money ..................................................24

The Distinctive Institutions ...........................................................................................26

Caveat................................................................................................................................26

Congressional Issues .................................................................................................................27

Figures

Figure 1. Incoming Truck Movements from Mexico (thousands), 1987-2007............................. 11

Figure 2. Top Ports for Transborder Merchandise Freight by Truck: 2006..................................12

Tables

Table 1. Roadside Inspections of Trucks Operating in the United States by Country of

Domicile: 2004 to 2008..........................................................................................................10

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Institute for Workplace Studies 
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