Cross-border transport 2024: Navigating the surge

From the November 2024 edition of Supply Chain Management Review.

November 2024

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The volume of cross-border freight movements among the three North American trading partners—the United States, Canada, and Mexico—has never been bigger or more complex.

Last year, Mexico overtook China as our nation’s largest trading partner for the first time in 20 years. According to the Census Bureau, Mexico imported $475.6 billion of goods into this country, surpassing China. Chinese imports last year fell 20% to $427.2 billion, according to Census Bureau data.

The numbers help to tell the story. There were more than 320,000 cross-border freight movements between the U.S., Canada, and Mexico last year; there were approximately 20,900 monthly cross-border freight movements between the U.S. and Mexico; and there were an additional 6,000 monthly cross-border freight movements between the U.S. and Canada last year.

Trade between the United States and Mexico hit $60.4 billion by value last December, which was down 0.9% from the same month in 2022 and 8.2% behind November 2023, according to the Bureau of Transportation Statistics. Even with that late-year dip, cross-border movements are surging as U.S.-based companies seek to shorten supply chains exposed for over-reliance on Far East manufacturing during and after the pandemic crisis.

“When you look at Mexico-U.S. trade, it’s accelerating at a growth rate that we’ve never seen before. It’s now the largest freight lane in the world,” says Luis Erana, CEO of ProTrans, which has been operating in both the United States and Mexico for 30 years with a fleet of 200 trucks and subcontracts with another 2,000.

Images of snaking lines of tractor-trailers at the world’s busiest cross-border point—Laredo, Texas, and Nuevo Laredo, Mexico—prove Erana’s claim. It can be a choke point, not just because of volume, but because novice cross-border shippers don’t understand the complexity of the Customs procedures.

With this new surge of activity in mind, let’s examine the main challenges for truckers going north and south; explore how can shippers ease delays at the border; explain how shippers can select a reliable Mexico-based trucking partner; and share some advice from cross-border experts who bring years of experience to the table.

Reshoring spurs freight growth

Historically, the main challenge of north-south moves to and from Mexico has been the drastic imbalance of trade. Over the years, that has meant three trailer loads northbound to the United States against one trailer southbound into Mexico.

“That historical imbalance causes waste,” says Frank Bateman, Ryder System’s vice president of supply chain solutions. “In many cases, you have to dead-head southbound, and that causes the waste.”

It’s not merely that freight volumes are growing among the three North American countries. Major manufacturers are literally coming closer to the U.S. market place, as they see it as a way to future-proof their supply chains.

Take Columbia Sportswear, for example, which is investing heavily in a modern manufacturing plant in Guatemala. The Portland, Oregon-based sportswear company recently shifted its major manufacturing hub from Asia to about 25 miles southwest of Guatemala City.

“We’re making a significant shift into this region,” Stan Burton, Columbia’s vice president of apparel manufacturing, recently told the New York Times. “We’re really repositioning from Asia.”

Executives say that’s taking place for the following three reasons:

1. The desire of manufacturers to be closer to their major consumer markets
2. Skyrocketing rates—increasing eight-fold in worst cases—of trans-Pacific ocean rates in the immediate aftermath of the pandemic.
3. Changing Customs regulations in the fine print of the U.S.-Mexico-Canada Agreement (USMCA).

Specifically, USMCA has made it financially worthwhile to move manufacturing locations closer to home. That’s because under USMCA, clothing now manufactured in Mexican and Central American factories can be exported to the U.S. duty free—just as if the raw materials were produced at American mills.

This liberalization of what can be exported to this country duty free has boosted the reshoring boom. This is being aided by Mexico’s desire to play a greater role in international supply chains.

However, as Kate Gutmann, UPS executive vice president of international, healthcare and supply chain solutions, recently put it: “It’s still a fragmented market with various players at each stage.”

So, let’s take a deeper look at how exactly freight moves across our southern border.

How it works in and out of Mexico

First-time shippers to Mexico learn some cross-border shipping techniques early on in the process.

Experts tell us to study the fine print, don’t wait on Customs paperwork, get all details locked in early, and find reliable carrier partners south of the border. And if you think bureaucracy is tough in the United States, working with the Mexican government may introduce
a few more headaches.

For example, on Jan. 1, 2022, Mexico’s new Complemento Carta Porte (CCP) invoicing requirements, which translates to “waybill complement,” went into effect in an effort to reduce illegal shipping activity.

The CCP requires carriers to provide supplemental shipment details. That means the information on the type of merchandise being transported; origin and destination; means of transportation; and more. Carriers can use the document to help prove that they’re authorized by the shipper to provide transportation services for the merchandise—and that the merchandise is, in fact, legal.

“It actually puts a huge burden on all participants in the supply chain,” says Ryder’s Bateman. “Carriers and shippers have to comply, and it’s relatively complicated to be 100% in compliance.”

Owners of the goods are primarily responsible for the information provided in the CCP. Incorporated as a supplement to the transportation services electronic invoice, the CCP can be issued as one of the following two types of invoices.

1. Income. Issued by the company that owns the vehicle and generates an income for performing the service of transporting goods, e.g., trucking companies, airlines or maritime companies.
2. Transfer. Issued by the company that owns the merchandise and the vehicles in which they are transported.

Carriers hauling goods inside Mexico must have a digital or physical CCP. This requirement is in addition to any other paperwork that carriers usually carry—invoices, packing lists, waybills, etc. Failure to comply with the fine print of CCP could mean seizure of the shipment, fines (to both shipper and carrier) and temporary shutdowns for carriers. “Everyone,” says Erana of ProTrans, “must be aware of the CCP Customs component.”

Advice to the novice

Experts advise novice cross-border shippers to thoroughly understand all the steps between their freight’s origin and destination.

That means understand what carrier picks up the freight in the U.S. and hauls to the border. And from there, one needs a Mexican Customs broker and then must hire a drayage partner to transfer the load from the border. Finally, the shipper needs a Mexico-based trucking company for final delivery since cabotage is prohibited intra-Mexico.

Partially to meet surging demand, Ryder System recently opened a new warehouse in Laredo, Texas, and expanded its drayage yard in Nuevo Laredo, Mexico. The goal is winning more cross-border freight.

“We do a value stream map, plan out steps, and make sure lines of communication are open. There’s the freight flow and then there’s the information flow, and you need to manage both to gain value.”

Already, the Miami-based logistics and transportation services company estimates it manages 250,000 freight movements annually across the Mexican border, with about 85% of that volume coming through Laredo. More than $300 billion worth of freight crosses into Mexico annually just through this gateway city.

Ryder’s newly built, 228,000-square-foot warehouse is three miles from the World Trade Bridge spanning the U.S.-Mexico border and is within six miles of Ryder’s other facilities in Laredo. Ryder executives say that the new facility will help customers scale cross-border shipping operations as cross-border volumes rise. Northbound shipments rose 5.9% year over year in 2023.

“We do a value stream map, plan out steps, and make sure lines of communication are open,” says Bateman. “There’s the freight flow and then there’s the information flow, and you need to manage both to gain value.”

ProTrans does it a bit differently. Using its own trucks, ProTrans says it can pick up freight in either country and doesn’t transfer loads at the border “We’re eliminating all the transfers at the border,” says Erana “We do it with team drivers. We have U.S. and Mexican drivers with the proper type of visas, and all of these are purely international shipments, no cabotage.”

On the rails

Shippers also have new rail options to handle growing amounts of cross-border freight as the cross-border intermodal scramble continues.

Following its introduction of the Falcon Premium cross-border intermodal service, Union Pacific has announced another service linking Mexico and the U.S. Southeast in collaboration with GroupoMexico, its partner.

These services were designed to compete with Norfolk Southern’s collaboration with Florida East Coast Railway that was announced late last year, as well as CSX and Canadian Pacific Kansas City’s partnership on the Alabama interchange.

“The U.S.-Mexico border is beset with immigration woes and infrastructure concerns. It’s one of the most conflicted borders in the world right now, and when it comes to freight, there’s some correlation and many challenges. With nearshoring growing so much, it’s going to get worse before it gets better.”

Also, Union Pacific (UP) launched a new domestic intermodal service between Mexico and the southeastern U.S. UP said that it was tapping into demand for service from Mexico’s industrial markets to Florida, Georgia, and North Carolina.

UP’s new service will reach nine destinations across the three states. Transit times from Mexico to destination markets range from eight to 14 days, according to the railroad. It was begun in partnership with Ferromex, Norfolk Southern Railway, CSX, and Florida East Coast Railway.

With nearshoring and domestic manufacturing expected to pick up pace, Cowen transportation analyst Jason Seidl says that he anticipates these routes will yield “notable volume opportunities” over the long run. “First-year results from the services show that cross-border intermodal services are delivering freight with truck-like speeds,” he says, adding, however, that the jury is still out on service consistency.

The future

Given that supply chains are still recovering from the hit-and-miss pandemic-era shortages, nearshoring is having its moment. Specifically, auto manufacturers and apparel manufacturers have chosen to build factories in northern Mexico to take advantage of proximity to U.S. markets and shorten their supply chains.

“Mexico is accelerating as a manufacturing hub,” says Erana. “It already has taken a leap, but capacity is going to get tighter.” However, he adds that it’s not as simple as finding a truck and moving freight. “The U.S.-Mexico border is beset with immigration woes and infrastructure concerns. It’s one of the most conflicted borders in the world right now, and when it comes to freight, there’s some correlation and many challenges. With nearshoring growing so much, it’s going to get worse before it gets better.”

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