Having worked in the trucking industry for nearly 17 years, President Obama’s meeting this weekend with Mexican President Felipe Calderon is of particular interest to me.
As part of a three-nation meeting, the U.S. and Mexico are discussing a number of issues regarding NAFTA, specifically a ban on Mexican trucking companies operating in the U.S.
According to the Associated Press, President Obama made no progress Sunday on the divisions between him and Calderon over the ban.
The original terms of NAFTA required the United States to grant Mexican trucking companies full access to its highways by January 2000, but domestic opposition stalled that plan until a 2007 pilot program allowed some Mexican carriers to cross the border.
Facing opposition from U.S. labor unions and consumer groups, Obama signed a bill that included a ban on spending for the program.
Mexico retaliated in March by imposing tariffs on 90 U.S. products. The tariffs are designed to ratchet up political pressure on the Obama administration to solve the trucking dispute.
Calderon reportedly quizzed Obama on his earlier promise to restore a canceled pilot program that had allowed Mexican trucking companies to travel into the United States.
An official taking part in the meeting said Obama told Calderon he would work “to try to move forward” but also said Congress has “legitimate safety concerns” about Mexican trucks.
Mexican trucking companies have not improved their safety standards for their trucks or the requirements for their drivers. Unlike U.S. trucking companies that undergo stringent equipment inspections, Mexican trucking companies don’t have to meet strict safety requirements.
Clayton Boyce, representing the American Trucking Association, says “allowing trucks to smoothly cross the border would save U.S. consumers up to $400 million a year. What it does is it saves fuel and it saves money by making the border crossings much more efficient.”
While a portion of transportation costs could be reduced or even eliminated as it relates to trans-border operations, there wouldn’t be any savings in fuel costs as he suggests.
The cost of diesel in Mexico is nearly $0.20 higher per gallon on average than it is in the U.S. Fuel costs are factored into the total cost of moving each load starting at the origin point.
Boyce also failed to mention that many U.S. trucking companies control freight movement between Mexico and the United States by utilizing carriers they own.
Shipper’s Transport, a truckload carrier that employed me in the late 1990′s, had a major operation in El Paso, Texas.
At that time, freight under our control moving from Mexico to the U.S. was handled by Shipper’s International, a “subsidiary” of Shipper’s Transport.
Shipper’s International was actually owned by the same man – an American – that owned Shipper’s Transport.
Major U.S. trucking companies like Swift, J.B. Hunt and Schneider all handle freight movement between Mexico and the U.S. in similar fashion.
At present, trucking companies hauling freight from Mexico with destinations in the U.S. are required to stop at various border crossing points.
At that time, the freight has to be transferred from the Mexican carrier to a U.S. trucking company, customs paperwork is addressed and then the freight can be transported to its destination.
That process is reversed for freight originating in the U.S. with destinations in Mexico and results in a border crossing fee of $250-$350 for every load moved.
In addition to safety requirements, insurance issues regarding minimum coverages are major hurdles that have yet to be satisfied.
Aside from the major trucking companies that are often self-insured, most U.S. carriers are required to have at least $1 million in Auto Liability and $100,000 in Cargo insurance.
In some cases, depending upon the requirements of shippers, carriers must also have at least $2 million in aggregate General Liability insurance.
Mexican trucking companies would also have a decided advantage in offering dramatically lower rates to U.S. shippers.
While that would bode well for manufacturers, U.S. trucking companies couldn’t compete based on a number of factors, including driver pay, maintenance costs, highway use and fuel taxes, emission control, tolls, registration fees and base plates.
The Obama administration says resolving the trucking dispute will have to wait until Congress reconvenes in the fall. At that time, Congress should continue to enforce the ban imposed on Mexican trucking companies from operating in the United States.
