SCDigest Editorial Staff

The News:  On February 22, the US Secretary of Transportation, Mary Peters, and the Mexican Secretary of Transportation and Communication, Luis Tellez, began the inspection process for 100 Mexican trucking companies to certify their ability to operate beyond the current 20 mile “commercial zone.”  Six months from now, a similar number of US trucking companies will begin a process to permit their operation in Mexican territory. It is expected this is the first step in a program to allow Mexican truckers full access to U.S. markets.

The Impact: It depends on your perspective. Proponents say the availability of Mexican truckers will help allay the serious truck driver shortage the industry is facing, and which is expected to continue for some time (see Driver Shortage Not Expected To End Any Time Soon.) Conversely, unions and other groups warn that the move will eventually depress pay levels for American drivers, and lead to less safe highways for motorists.

The Story: The move to pilot the Mexican trucking program is actually behind schedule. Access to all U.S. highways for Mexican truckers was promised by the year 2000 under the 1993 North American Free Trade Agreement (NAFTA). Back in December 2003, the Washington Times reported that: "The U.S. Transportation Department in November 2002 issued the new rules that would allow Mexican operators to begin working in the United States. But the move was stopped when consumer, labor and environmental groups sued to block Mexican trucks and buses from expanding operations outside a very narrow commercial zone along the border."

Stemming from NAFTA, many Mexican companies have already been conducting short-distance hauls throughout the border states of Texas, Arizona, New Mexico and California. Unlike previous agreements which contained mileage limits, the new program is free of these mileage restrictions.

Many are hailing the move as long overdue, with substantial benefits to the economy and to shippers.

“The winners from this move are consumers, exporters, and efficient trucking companies on both sides of the border.  Transportation costs will decline, which benefits exporters and consumers,” said Erik Markeset of CP Consulting, a Supply Chain Digest Expert Insight columnist. “Trucking companies that have the scale, volume, and management infrastructure to operate efficiently will be winners.  The losers are all parties that have benefited from the inefficiencies, including companies that have specialized in the multi-step border crossing process, also known as the “transfer.”  Trucking companies whose business has disproportionately been border-to-destination moves will be hurt if they are not able to leverage their in-country delivery competency into securing moves from origin.”

Others, especially the Teamsters union, have a different view.

"They are playing a game of Russian Roulette on America's highways," Teamsters Union James Hoffa has said, warning that poorly maintained trucks coming out of Mexico will lead to huge safety dangers.

In our view, the driver shortage “crisis”, though perhaps somewhat overblown, is real, and will contribute to growing challenges for shippers in terms of cost, capacity and service. Regulations and inspections to ensure vehicle safety for Mexican truckers may be needed, but would seem relatively easy to implement.

The other factor to consider is that many companies are re-looking at Mexico as a low-cost country sourcing location, pulling back a bit from China over concerns about rising costs, long supply chains, and other risks. A smooth flow of goods from Mexican factories to U.S. markets will be increasingly important for many supply chains. Somewhat overlooked is the fact that U.S. truckers will have similar restrictions removed for moving U.S. made goods to Mexican markers.

Do you think the pilot program and eventually opening of U.S. markets to Mexican truckers is a good thing or bad? Why?  Let us know your thoughts at the feedback button below.