Green light for Mexico

The Supreme Court's recent NAFTA decision, which clears the way for Mexican trucks to drive north past the arbitrary 20-mile limit, will have few short-term effects. After several years, however, the industry is bound to see substantive changes in how freight is hauled in North America. The economic benefits are too enticing to pass up, and once political constraints and plain-old inertia disappear,

The Supreme Court's recent NAFTA decision, which clears the way for Mexican trucks to drive north past the arbitrary 20-mile limit, will have few short-term effects. After several years, however, the industry is bound to see substantive changes in how freight is hauled in North America. The economic benefits are too enticing to pass up, and once political constraints and plain-old inertia disappear, a more streamlined and efficient North American trucking system will re-pace the current one.

The history of capitalism has always been to smooth out processes and make them more efficient — whether on a factory floor or in the supply chain — and trucking is no exception, most economists argue.

“We have an outmoded system that grew up with the times,” says one carrier official. “Mexican trucks unhook their trailers just after the border where a U.S. driver picks it up. It's a wasteful step.” In many cases, Mexican carriers drop their shipments before reaching the U.S. border, where drayage carriers take them through customs and then unload them within 20 miles of the border for pick-up by U.S. carriers, adding an additional step.

The shorthaul carriers are part of a system that grew up around the vagaries of border bureaucracy, which found it cheaper to hire less experienced, poorly paid drivers to essentially wait in line, instead of wasting the time of better paid, more experienced drivers. If the border crossing were more efficient, this system would not have taken root at all.

Before this outmoded system can change, several steps needs to take place.

First, the Bush Administration has promised to shorten waiting times at the border by hiring more inspection personnel, building more inspection bays and implementing wider use of crossing technology, such as the FAST system used extensively along the U.S.-Canada border and just starting to catch on at the southern border.

So far, border times have actually increased in some cases along the U.S.-Canada border, mainly because of terrorism concerns. But more important, they are inconsistent. Carriers report that crossing times can take 15 minutes to several hours, a situation that plays havoc with just-in-time deliveries.

This is a common complaint at Detroit-area crossings, which often serve trucks hauling car parts. It is this inconsistency that keeps border drayage companies in business. They've learned to exploit and profit from a kink in the system.

Second, Mexican carriers must upgrade their equipment to meet U.S. pollution and safety standards. Currently, the average age of equipment in Mexico's longhaul fleet is seven years, compared to five for U.S. fleets. Mexican carriers report that they routinely receive safety citations from U.S. state inspectors and law enforcement, which has discouraged many forays north even by those permitted under “grandfather” rules — about 30 carriers, according to FMCSA. It's not known how many actually travel beyond the 20-mile barrier, but clearly many more want to do so.

According to DOT spokesperson Brian Turmail, about 679 applications from Mexican carriers are pending, but FMCSA was prohibited by law from processing them while the Supreme Court was deliberating the case of whether the agency needed to secure an environmental impact study prior to opening the border. In its ruling, the high court said that DOT did not have to perform a study, despite a lower court ruling to the contrary.

The agency is now legally permitted to start processing applications. FMCSA also must negotiate arrangements with Mexico so U.S. inspectors can check some Mexican trucks in that country before they reach the U.S., easing the burden of federal border personnel and state inspectors.

How many Mexican carriers will opt to go North American remains to be seen. Legal matters aside, many of the smaller companies must not only upgrade their equipment but also increase their drivers' language skills to compete against U.S. carriers. In addition, it's not clear if, in the interim, U.S. carriers will be tempted to enter the Mexican market or increase their current positions in Mexican subsidiaries.

For many of them, the current system works fine for now. But change is inevitable.

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