The next sound that you hear will likely not be Mexican truckers clamoring to enter U.S. commerce beyond the traditional 25-mile commercial zone on the U.S. side of the border.
On Oct. 21, 2011, the U.S. government granted the first operating authority to a Mexican trucker —Transportes Olympic—to serve the U.S. market beyond the so-called commercial zone. Since then, only nine Mexican carriers, 17 trucks, and 20 drivers have been granted similar rights, according to third-quarter data from the U.S. Department of Agriculture (USDA). Applications are pending from 13 additional carriers, USDA said.
If the sluggish pace continues, it will be impossible for the Federal Motor Carrier Safety Administration (FMCSA)—the Department of Transportation (DOT) sub-agency that grants the permits—to validate the safety performance of Mexican carriers operating under a three-year pilot program agreed to by both countries in the summer of 2011.
The FMCSA estimates that at least 46 carriers would have to receive U.S. operating authority for the agency to hit the target of 4,100 inspections needed to develop a statistically valid analysis of the program's safety record. However, only 168 inspections were performed in the program's first year, according to information on the USDA's website.
An FMCSA official, speaking on condition of anonymity, said the agency "anticipates sufficient participation" from Mexican carriers to be able to properly evaluate the program's safety considerations.
The data, for now, appears to validate long-held claims that Mexican truckers have little interest in serving the broader U.S. market outside of the border territory due to several barriers of entry. For one, Mexican carriers would need to find freight to haul back to Mexico, not an easy task if the truck's head haul leaves it far from the border. Language barriers could create problems for all involved. There is also the high cost of labor, maintenance, facilities, and equipment in the United States, a high bar to scale for a Mexican carrier that may have a fleet of 10 trucks or less. Then there is the liability exposure in the U.S., a risk many Mexican companies would be unwilling to take on even if they could find affordable insurance coverage.
Tom Sanderson, CEO of Transplace, a Dallas-based third-party logistics provider with a sizable presence in Mexico, said he sees little activity for Mexican truckers outside of cities like Houston, Dallas, and San Antonio, Texas, and similarly located markets in other border states. "It will be a very long time before we would see Mexican truckers delivering freight throughout the U.S.," Sanderson said.
The pilot program was created by a July 2011 agreement between the two countries that ended a 28-month dispute after the U.S. terminated the first pilot in early 2009. As part of the dispute, Mexico had slapped retaliatory tariffs on nearly 100 U.S. import products, costing U.S. agricultural and industrial producers more than $2 billion.
The value of agricultural trade between the two countries was estimated at $35.2 billion in the 2012 fiscal year, according to USDA data. The U.S. held a $2.6 billion positive balance of agricultural trade with Mexico during that period, the agency said.
Under the North American Free Trade Agreement (NAFTA) that took effect January 1, 1994, U.S. and Mexican truckers were to be allowed unfettered access into the other's country by 2001. However, Mexican truckers have been effectively kept out of the U.S. by a barrage of lawsuits alleging that their operations are unsafe and that low wages paid to Mexican drivers pose a threat to U.S. driver jobs. For their part, U.S. truckers have shown scant interest in operating deep inside Mexico, citing concerns for their personal safety.
The Teamsters union and the Owner-Operator Independent Drivers Association (OOIDA) are suing to shut down the pilot program, saying it is dangerous and illegal. Earlier this month, they told a federal appeals court in Washington, D.C., that the program violates multiple U.S. laws and sets different standards for Mexican drivers than for their U.S. counterparts.
For example, the Teamsters argued the agreement requires Mexican drivers to be able to only identify the color red. By contrast, U.S. drivers are required to identify the colors red, yellow, and green, the union said. "Color recognition has been determined by the DOT as essential to highway safety," the union said in a statement.
If successful, the legal actions could put U.S. exporters "behind the eight ball" once again. According to the USDA, Mexico stands ready to re-instate the punitive tariffs if the program is terminated or similarly disrupted within the three-year window.
A resumption of the Mexican tariffs could wipe out most, if not all, of the ground U.S. growers have regained since the levies were lifted. Since October 2011, which coincided with the start of the federal government's 2012 fiscal year, tonnage of the 54 affected agricultural commodities rose 10 percent from fiscal year 2011, a period when the tariffs were still in force, USDA said.
Editor's note: This article was updated on Dec. 18 to include the information from the FMCSA representative.