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NAFTA: The final mile

It won't be a giant sucking sound you'll hear, but more of a gentle but firm whoosh when NAFTA's legal bridge is finally in place to let U.S. and Mexico truckers compete across and on either side of our southern border. But that's not to say final implementation of NAFTA-required trucking provisions will be one big yawn. Far from it. There's too much freight to be moved on both sides of the border

It won't be “a giant sucking sound” you'll hear, but more of a gentle but firm whoosh when NAFTA's legal bridge is finally in place to let U.S. and Mexico truckers compete across and on either side of our southern border.

But that's not to say final implementation of NAFTA-required trucking provisions will be one big yawn. Far from it. There's too much freight to be moved on both sides of the border and across it for anyone to miss out on the action who's truly committed to playing in what will largely be a new game.

It's easy to get turned off by the hype that easing cross-border truck transportation has stirred up on both sides of the border.

NAFTA as a hot button is an old story but one that retains enough political kick to still warrant the attention of the highest levels of government in both countries.

Back in 1996, reading the political tea leaves stirred up by the combined efforts of the Teamsters and various safety and environmental groups, President Clinton issued a “moratorium” on implementing the cross-border trucking provisions of the free-trade treaty.

Even though a NAFTA arbitration panel early last year said the U.S. was in violation of the treaty's terms for not letting qualified Mexican carriers into the U.S., Congress went and legislated what amounted to a set of new safety-focused requirements Mexican carriers must meet before being granted full authority to operate in the U.S.

Congress at the same time ordered DOT to take specific steps to ensure Mexican entrants are properly inspected for U.S. safety compliance before they even see this side of the border.

NAFTA was meant to address trucking in all three signatory nations through these key provisions detailed in Chapter 12 of the treaty:

  • U.S., Canadian and Mexican carriers were to have cross-border access to all parts of all three countries.

  • U.S. and Canadian companies were to be able to acquire minority ownership in Mexican carriers providing international cargo services by the end of 1995. They were to be allowed 51% ownership by 2001 and 100% ownership by 2004.

  • The countries were supposed to harmonize their technical and safety standards, not put in place barriers to entry in the name of safety as the U.S. has done.

Those safety barriers have effectively limited Mexican carriers to shuttling freight across the border without leaving narrow commercial zones around the ports of entry.

The fierce opposition to Mexican entrants to U.S. trucking can seem out of proportion, given how few Mexican carriers are likely to cross over. Published estimates put the number of Mexican carriers truly capable of launching cross-border ops as low as 100. Taken together, these operate perhaps 10,000 trucks.

“NAFTA is not an open door for any Mexican carrier,” says Martin Rojas, director of customs and cross-border operations for the American Trucking Assns. “Each must separately apply for operating authority within and beyond the commercial zones along the border.” In other words, when the Bush administration lifts the gate, they can't just pour in as NAFTA opponents fear.

“Mexican carriers must submit an extensive application to gain authority,” says Rojas. Given that, he says it's little wonder only 40 to 50 Mexican carriers — running all told some 170 trucks — have even applied for U.S. authority so far. “It will take awhile before we see many Mexican carriers operating in the U.S. because they're not interested in dealing with our local, state and federal regulations,” he contends. “Many would rather partner with U.S. carriers and some carriers here have already partnered with Mexican operations.”

Rojas predicts such linkups will continue. “The trade volume between the two countries has been increasing and trucks move over 80% of that freight,” he states.

Offering a private-fleet perspective, Gary Petty, president & CEO of the National Private Truck Council, says most private fleet operations involved in U.S.-Mexico trade currently run separate fleet systems in each country and aren't “co-mingling” them. “Many are in fact so well-positioned they won't be affected by the introduction of Mexican carriers into the U.S,” Petty contends.

“While the federal government is working furiously to get all this in place,” he remarks, “my guess is we won't see a huge run-up in interest by Mexican firms, especially given the current state of the freight market. But Mexican carriers that do get authority will be watched very carefully,” he continues, “as the last thing the U.S. government wants to see is the type of accident that plays up a negative image.”

Longer term, Petty concedes that lifting trucking restrictions at the border would allow for the “likelihood of greater integration of trucking operations by some companies” over time.

However things develop over the long term, frustration over American foot-dragging seems to be mounting in Mexico. No doubt wearied by the controversy, President of Mexico Vicente Fox Quesada threatened earlier this summer to retaliate by limiting U.S. trucks' entry into Mexico if Mexican trucks were not let in soon.

According to an Associated Press report posted on, Fox told a meeting of the Mexican trucking association Camara Nacional del Autotransporte de Carga that he has not let up on Washington to revoke the “isolationist and discriminatory” restrictions blocking Mexican carriers from operating in the U.S.

Since then, President Bush's administration has gone on record saying it will open the border to qualified Mexican trucks by “midsummer.” But as of press time that had not yet happened.

But the political pressure on both sides of the border, coupled with the fact that anti-NAFTA groups here have played out all conceivable hands, means the grand opening will happen sooner than later.

Meanwhile, thanks to Mexico to date not reneging on NAFTA's trucking provisions, U.S. carriers have been able to acquire at least minority stakes in Mexican operations.

So far, Consolidated Freightways (CF) is the only internationally licensed LTL carrier to operate in Mexico. According to Brian Hickert, CF's San Antonio-based Mexico region vp, that means “there are no hand-offs to third-party vendors when freight crosses the border.” He says other LTL carriers interline freight at the border but “CF operates and maintains its own fleet of trucks in Mexico.”

The LTL giant began its current phase of Mexican operations in 1998, when it formed a joint venture with Mexico's Alfri-Loder Group to establish the Mexican subsidiary Consolidated Freightways Alfri-Loder.

Hickert points out that CF's Mexican roots run deeper than that, stating that the carrier “was the first LTL to set up interline deals with Mexican carriers decades ago.”

CF entered the Mexican freight market through a co-ownership position with Alfri-Loder, but Hickert says the business “has grown and now we want to make a further investment.”

While Hickert won't state exactly what that investment will entail, he says “CF will make a major announcement of a change in our position in the near future.”

Despite the appeal the market clearly holds for CF, Hickert expects competition will increase “fairly gradually.” He says that as for Mexican carriers, “there are a few in position to start running in the U.S.” once they're let in.

“The first thing to remember,” Hickert advises, “is the Mexican carriers that can take advantage of NAFTA provisions are of the upper echelon. They typically run fleets of trucks under lease that are only three to four years old, kept in tip-top shape and operated by competent drivers. And they must be, because Mexico's roads are rough.”

Hickert contends that the general media has focused too much on the aged fleets run by Mexican operators since the free commercial zones opened along the border. “The longhaul fleets have excellent equipment,” he emphasizes. “As long as we [the U.S.] are clear on what our safety rules are and inspect them, we will all be on the same page” when the border opens up.

While CF has embarked on the most formal entry into Mexican trucking, other U.S. carriers have made lucrative inroads simply by partnering with Mexican fleets without making any monetary investments.

Truckload carriers have been in the vanguard here, including such prominent cross-border players as Schneider National and Celadon.

Among these is a real pioneer, Contract Freighters Inc. (CFI). According to president Herb Schmidt, CFI has been partnering with Mexican carriers for 16 years.

“CFI identifies Mexican carriers to partner with and we sign a contractual interline agreement under which they take our trailers at the border,” Schmidt explains.

“We felt that was the most commonsensical way to do it,” he continues. “And while we work in Mexico through partnerships, we do have our own sales force in place there to ensure our equipment is utilized to the fullest.”

Schmidt reports CFI currently partners on a non-exclusive basis with some 80 Mexican carriers “so long as they meet our service parameters.” In fact, he notes, it was the request of a single cross-border automotive shipper that launched CFI's Mexican focus. “Starting with that one load,” says Schmidt, “now 50% of our revenues are derived from freight that has its origin or destination in Mexico.”

And while CFI's preference remains building on partnerships, Schmidt admits that if business conditions dictated that CFI enter into co-ownership of a Mexican entity, “then we will do it.”

As for what may happen this side of the border, Schmidt fully expects the entry of Mexican carriers into the U.S. will occur “much more gradually than flipping a switch, regardless of the actual date.”

And he contends that much “infrastructural ground work must be done on each side.” Among the key differences he cites are the language barrier (in both directions); the fact that U.S. trucking transactions are highly electronic, whereas Mexico operates mostly on a cash basis; and concern over the ability of Mexican drivers to meet strict U.S. standards.

But he states CFI is “not concerned with increased competition” that may result from an open border. “Long term, this will be healthier for both sides,” Schmidt affirms. “Short term, we must recognize change is painful but we can't fight it. It's better to figure out how to jump the hurdles together.

“And,” he adds, “you can be sure they are just as concerned south of the border about what's ahead as we are up here.”

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