Stiffer Safety Standards Keeping Mexican Trucks Out of US

The governments of Mexico and the US say the 18-month pilot program resolves the issue of how to implement the 1994 North America Free Trade Agreement while keeping unsafe and polluting trucks off the road.

It took 17 years and $2.4 billion in trade tariffs to get the US Transportation Department to let a Mexican long-haul truck cross the border last month. It's unlikely that many more will line up, the head of Mexico's biggest trucking organization said.

The governments of Mexico and the US say the 18-month pilot program resolves the issue of how to implement the 1994 North America Free Trade Agreement while keeping unsafe and polluting trucks off the road. Yet enough business barriers remain that trucking companies will probably stick to the solutions they've developed in the interim, executives in both countries say.

Most Mexican trucking companies won't make long-term investments in technology to meet tougher US pollution controls because they're not sure their licenses to enter the US will last longer than the program, says Jose Refugio Munoz, chief executive officer of trucking group Camara Nacional del Autotransporte de Carga, or Canacar. A similar pilot project ran from 2007 to 2009 before it was canceled.

"We've had it up to here with experiments," Munoz, whose Mexico City-based group's members operate 400,000 trucks, said in a telephone interview. "It's very uncertain, and that's why there are very few companies interested in participating."

Mexico is the second-largest market for US exports. Seventy percent of the $400 billion in annual trade between the countries travels by truck, Mexico's embassy in Washington said.

Twenty-seven companies and 101 trucks hauled cargo into the US under the previous trial. When Congress cut off funding in 2009, Canacar sued to enforce NAFTA, leading Mexico to slap the US with retaliatory tariffs. Mexico lifted the last of the $2.4 billion in duties when US regulators approved Transportes Olympic de Mexico de RL de CV of Apodaca, Mexico, to cross the border last month.

Transportes Olympic has 54 trucks and 61 drivers, according to Guillermo Perez, a spokesman. Only one truck has permission to travel in the US, and Transportes Olympic will try to get more approved "little by little," he said. The company would invest more if the border were opened permanently, he said.

"A lot of new prospects have been calling us," he said. The company plans to ship to Texas, Kansas, Illinois, Tennessee, Georgia, North Carolina and South Carolina, Perez said.

Only one other company, Tijuana, Mexico-based Grupo Behr de Baja California SA de CV, has applied to follow Transportes Olympic, according to the Federal Motor Carrier Safety Administration. The agency is evaluating the application after Advocates for Highway and Auto Safety, a Washington-based watchdog group, and the Owner-Operator Independent Drivers Association, based in Grain Valley, Missouri, identified problems with the company's safety record.

Six other companies are preparing to apply, according to Mexico's transport ministry. The largest owns 15 trucks, and most have 1 or 2, according to FMCSA records.

Efficient trade has been developing despite the closed border, Swift Transportation Co. Vice President David Berry said in an interview. Before NAFTA, trucks were typically unloaded at border warehouses, loaded onto a second truck to cross the border, then loaded onto a third truck to reach the destination.

Today, a single trailer is used, even if three different drivers handle parts of the route, Berry said. Border delays are down to a few hours from multiple days in years past.

US companies including Swift, Con-way Inc. and Werner Enterprises Inc. deliver to Mexico using Mexican drivers, while many Mexican companies use US partners. That will probably continue, said Richard Stocking, president and chief operating officer of Swift, the only US carrier with a fully owned Mexican subsidiary.

"The door is only swinging one way," Stocking said, "I don't see how this will be a significant change."

The International Brotherhood of Teamsters is among groups opposing the border opening, saying Americans will lose jobs to lower-paid workers from Mexico.

"This pilot program will be a fiasco, just like the last one was," Teamsters General President James Hoffa said in October. Mexican operators may not be able to meet US safety standards and drug violence in Mexico may keep US drivers north of the border, he said.

The Mexican companies participating in the previous pilot project had a better safety record than their US counterparts. In 7,000 safety inspections, 0.5 percent of Mexican drivers were taken off the road, compared with 13 percent for US drivers at companies that have been operating for 18 months or less, according to a panel created by Congress to review the 2007 pilot program.

Canacar is still pressing a lawsuit to open the borders permanently, Munoz said.

"We're going to keep pushing forward with the lawsuit against the US government for not living up to the terms of the free-trade agreement," Munoz said.

Different work rules, cost structures, language, and equipment that won't run on the fuel available in the other country are among the non-political barriers preventing the seamless trade envisioned by NAFTA, said Derek Leathers, president and chief operating officer of Werner Enterprises.

It's more efficient to have Mexican drivers working in Mexico, where they know the territories and traffic laws, and US drivers on US routes, Leathers said.

The US legal system will scare some Mexican companies off, said Herb Schmidt, president of Con-way Truckload in Joplin, Missouri. For example, liability in Mexico might be limited to $1,500 per trailer, even if the cargo is worth $1 million, he said. In the US, "a million's worth a million," Schmidt said.

Con-way intends to deliver goods to Mexico via its current Mexican partners until that method is no longer cost efficient, he said.

Issues complicating Mexican trucking companies' ability to do business in the US include the country's cabotage laws, which prevent a foreign-owned company from moving freight from two points within US borders and permit only trips to a specific point and back to Mexico.

A US-Mexico route will only work if there's a perfect balance of loads going each way across the border, and that's difficult to do, says Jim Filter, general manager for Schneider National Inc.'s operations in Mexico. Schneider National is based in Green Bay, Wisconsin.

Additionally, border delays count against the 11-hour limit placed on daily driving time in the US, Filter said.

Schneider doesn't own trucks in Mexico because it's more profitable to subcontract with a small number of Mexican carriers, he said. Using expensive US equipment in Mexico puts a company at a cost disadvantage, he said.

The current pilot program "doesn't make transportation more efficient or cost-effective between the US and Mexico," Filter said. "That has to be the driving force."

The program's creation may mean policy makers in Washington and Mexico City can turn their attention to more practical issues that may enable freight to move faster, like consolidating separate inspections by the Food and Drug Administration, the Drug Enforcement Agency and the Customs and Border Protection, Leathers of Werner Enterprises said.

"We think it's a positive to take away an issue between the two countries," Leathers says. "As long as the politicians are arguing over whether the border is open or closed, we're not talking about things that matter more."