NAFTA (Failure) Will Bring Upheaval
As negotiations continue over the future North American Free Trade Agreement, we can be certain that change is coming, according to Mike Cervin, vice president of sales for CFI.
While As negotiations continue over the future North American Free Trade Agreement, we can be certain that change is coming, according to Mike Cervin, vice president of sales for CFI.
While it’s still too early to tell what a final agreement will look like, industry watchers expect changes to tariffs, trade policies and procedures, amended customs regulations and other changes that will impact wallets.
Cervin says there are key trends that importers, exporters, motor carriers and brokers should be concerned with when it comes to cross-border shipping among Mexico, the United States and Canada:
Trade Flows
The nature of trade flows among Mexico, the United States and Canada are a continuous challenge for shippers and their transportation partners.
At the Laredo, Texas gateway, the vast majority of freight is coming from destinations deep inside of Mexico, and the trade breakdown is four-to-one; out of every five trailers crossing the border, four are loaded with exports from Mexico going north into the United States, with only one loaded trailer going south into Mexico.
On average, shipments transiting Laredo will have a length of haul within Mexico of somewhere between 400 to 500 miles. This reflects the significant investments companies have made to build manufacturing capacity deeper into Mexico’s interior. Other gateways, such as El Paso, Texas, and San Diego, have a similar situation. However, in the case of El Paso, most shipments originate or stay within about 200 miles of the border, so the transportation economics are not as challenging.
But the imbalance problem persists.
For trucking companies and intermodal rail providers, the challenge is cost effectively balancing equipment in these trade lanes so enough trailers are in Mexico at the right time to handle the higher volume of northbound exports. And the current tight freight capacity market is exacerbating the situation.
In the past, when capacity was more plentiful, carriers would “deadhead” trailers back into Mexico to reposition them for northbound export freight — at little or no cost to the exporter or importer.
Today, the tight capacity situation has flipped the script. To get equipment where they need it, exporters are more likely to have to pay much more of the cost to get that equipment repositioned, whether by truck or intermodal rail.
All this makes exports coming out of Mexico more expensive as transportation costs have risen.
Risk and Security
A top concern among importers and exporters is assurance that their freight will be secured.
The key to risk management in Mexico is finding the right partner in the country, with experience, resources and infrastructure to successfully manage cross-border freight. still too early to tell what a final agreement will look like, industry watchers expect changes to tariffs, trade policies and procedures, amended customs regulations and other changes that will impact wallets.
