U.S. Supreme Court Finally Removes Decade‐​long Roadblock to U.S.-Mexican Trucking

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On June 7, 2004, the U.S. Supreme Court ruling in the case ofthe U.S. Department of Transportation v. Public Citizencleared the way for Mexican and American truckers to operate ineach other's home markets. The ruling upheld the authority ofCongress and the Bush administration to implement a freedom thathad supposedly been granted a decade earlier under the NorthAmerican Free Trade Agreement.

To eliminate the last legal barrier to giving Mexican trucksfull access to American highways and vice versa, the Courtoverturned a 2003 ruling from the Ninth Circuit Court of Appeals inCalifornia, which had found that the federal government violatedenvironmental law when it announced plans to open highways toMexican trucks without conducting air-quality impact studies. Theadministration had argued that the appeals court was incorrectbecause its ruling interfered with the ability of the executivebranch to comply with NAFTA. Cutting to the central issue, JusticeClarence Thomas (writing for the majority) said that U.S.regulatory agencies were under no obligation to do a full review ofthe potential environmental impact, the requirement that had leftMexican trucks stalled at the border for a decade.

The final wrangle over the opening of the U.S.-Mexican border tointernational trucking stemmed from a much earlier contest over thederegulation of transportation in particular and free trade ingeneral. Beginning in the late 1970s, the U.S. federal governmentenacted a wave of deregulatory legislation aimed at transportation.The airlines were deregulated in 1978, leading to dramaticreductions in the price of tickets. The deregulation of interstatetrucking, begun in 1980, culminated with the abolition of theInterstate Commerce Commission in 1994. Intrastate truckingfollowed, also in 1994. In each case the freer flow of traderesulted in an upswing in commercial activity and lower prices forthe consumer as such innovations as "just in time" deliverieslowered substantially the cost of producing and delivering goodsthroughout the United States.

The border between Mexico and the United States proved abottleneck. Protectionist pressures kept Mexican trucks fromcrossing more than a few miles into the United States and made thecrossing time-consuming and expensive; American trucks operatedunder similar restrictions when crossing into Mexico. The vision offree-flowing trade from Canada to Central America remained justthat, a vision, while the perception that the United States mightbe promoting free trade in theory but undermining it in practicetarnished our reputation internationally and gave rise toresentments south of the border.

NAFTA and Cross-border Trucking

How did that happen? The Bus Regulatory Reform Act of 1982imposed a moratorium on the granting of authority to Mexican andCanadian motor carriers to operate in the United States beyond alimited zone along the respective borders. The moratorium withrespect to Canada was lifted the same year, giving U.S. carriersaccess to Canadian markets; but the restrictions onMexican-domiciled trucks and regular-route buses remained. Theycould operate only in border commercial zones, generally 3 to 20miles past a U.S. municipality's corporate limits. Beyond thatlimit Mexican trucks had to offload their cargo onto Americantrailers. When American truckers crossed the border into Mexico,they were required to do the reverse. In other words, aninternational shipment traveling from Mexico to the United Statesor vice versa demanded at least two drivers and two trailers toperform a single freight movement. The process was inefficient andtherefore costly in terms of time and manpower.

NAFTA, designed to promote free trade among the United States,Mexico, and Canada, was ratified by the U.S. Congress in late 1993and implemented on January 1, 1994. It was to have ended thatinefficient procedure by liberalizing access for cross-border busand truck services.

The agreement laid out sweeping modifications in transportationprovisions:

  • Three years after the signing of the agreement, by December1995, Mexican and U.S. carriers were to be allowed to serve theadjoining border states of the other country. However, there wereno provisions for domestic transportation within each country by aforeign-owned carrier, that is, cabotage.
  • Six years after ratification, cross-border service forinternational commerce was to be available to any point within theUnited States, Canada, or Mexico. Again there were no provisionsfor cabotage.
  • Seven years after ratification, U.S. companies might own 51percent of Mexican trucking companies; after ten years, 100 percentownership would be allowed. Again, there were no provisions forcabotage.

Left unresolved were such issues as labor law, local drivingrestrictions, cargo security, and customer service. Primarypolitical concerns still being debated included the safety ofMexican carriers, to say nothing of insurance requirements andcargo liability for Mexican drivers operating on U.S. roads.

NAFTA Promises Delayed

Under pressure from the International Brotherhood of Teamsters,as well as environmental and consumer safety groups, the Clintonadministration changed course, announcing in December 1995 that itwould delay implementation of the cross-border liberalizationprovisions. The shift was a particular embarrassment for FedericoPeña, then U.S. secretary of transportation and a strongsupporter of the accord, who had traveled to San Antonio, Texas, toannounce progress in opening the border to international trucking,only to find that the border was still closed.

The Mexican government, stung by the affront, brought an actionbefore an international arbitration panel that ruled, in February2001, that the United States could not impose a blanket ban onMexican trucking, despite its often-voiced safety concerns. Thoseconcerns could, however, justify treating Mexican carriersdifferently than domestic and Canadian carriers when processingapplications.

President George W. Bush had asserted during his 2000 campaignthat the United States should honor its NAFTA commitments andassured Mexican president Vicente Fox that the border would befully opened to international trucking and to regular-route busservices. In keeping with the new spirit of openness, the FederalMotor Carrier Safety Administration, in March 2002, proposed threeregulations to allow Mexican trucks to operate beyond thecommercial zones, setting forth safety-monitoring procedures forall Mexican-domiciled carriers operating anywhere in the UnitedStates.[1]

Before rules were issued, an FMCSA assessment found that therules would have no significant environmental impact. The agencytherefore concluded that a full Environmental Impact Statement wasnot necessary. It then issued a finding of no significant impact,followed by the interim final rules. On November 27, 2002,President Bush modified the1982 moratorium to clear the way forexpanded truck and bus operations.

Claiming to be deeply concerned about the safety of the Mexicantrucking stock and about the prospect of a decline in air quality,critics of NAFTA had already mounted an attack. Joan Claybrook,president of Public Citizen, in alliance with the Environmental LawFoundation and other environmental groups as well as the Teamsters,filed suit in federal court, claiming that the government hadviolated the National Environmental Policy Act and the Clean AirAct by opening the door to Mexican trucking, which would allegedlypollute the U.S. atmosphere. The Teamsters, it is reasonable tosuggest, were less concerned with the putative environmental harmthan with the threat posed by Mexican drivers competing forjobs.

The Supreme Court's unanimous ruling of June 7 finally closedthe door to their legal challenges and opened the gate forcross-border trucking--more than a decade after enactment ofNAFTA.

Backup at the Border

As a result of those concerns and of legal questions, crossingthe border has remained a time-consuming process laden withadministrative and legal requirements. Those who have been dealingwith Mexico for many years have learned to maneuver through themaze with some degree of ease; novices would do well to followtheir advice.

Much criticism and concern has focused on drayage or cartage,the step-by-step procedure according to which cargo coming fromMexico is transferred to another carrier legally able to operate inthe United States. Drayage, it is said, results in air pollution ascarriers park in line, belching exhaust as they wait to cross theborder. In fact, the drayage/cartage requirement is unique to thePort of Laredo, where the trailers are transported across theborder by a cartage or drayage company employed by the freightforwarder or customs broker to ensure delivery to a crossingfacility from which cargo can be picked up and delivered to itsfinal destination in the United States. The process adds seriouslyto costs and slows deliveries.

Laredo, the largest and busiest of the border ports, ships morethan the port of New York. It has invested heavily in itsinfrastructure and has two relatively new commercialborder-crossing facilities. The standard picture of trucks foulingthe air is thus unfair to Laredo. The city has tried to keepwaiting time and thus pollution to a minimum and prides itself onhaving some of the cleanest air in the country. State and localregulations cull out trucks with bald tires and rigs belchingsmoke, making it impossible for them to continue to cross atLaredo. The Columbia and World Trade bridges, restricted tocommercial traffic, carry a steady stream of tractor-trailers. Thefirst has 6 lanes; the second offers the impressive spectacle of 12lanes of big rigs.

All other border ports, of which there are more than 20, allowthe Mexican carrier to pick up the southbound cargo at the locationof the U.S. freight forwarder and move the trailer cargo throughcustoms to execute delivery at the appropriate customer locations.Northbound cargo is handled in similar fashion: the Mexican carrierpicks up the trailer with its cargo from the shipper and moves itthrough customs inspection before making delivery to a U.S. freightforwarder location or directly to a U.S. carrier terminalfacility.

Because import duties are still applicable on some items,administrative requirements still exist to support NAFTAcompliance. To complicate matters, Mexican law requires that almostall duties be collected and submitted to the Mexican governmentprior to physical entry of cargo into Mexico. U.S. customs brokers,in contrast, are not required to collect applicable import dutiesat the time of entry since the law has provisions for delayedpayment.

There has long been talk of streamlining this cumbersomeprocess, but so important is trade between Mexico and the UnitedStates that shippers have been willing to cope with the problems.Eighty percent of the trade between the United States and Mexiconow moves by truck, and the volume of shipments has grown steadily,especially since the advent of NAFTA. From 1993 to 2000, there wasa fourfold increase in two-way trade between the United States andMexico, with four million border crossings annually.

The standard horror story had unsafe and polluting rigs massedat the border, waiting to cross once the Court decided onderegulation. The reality is radically different. Perhaps 90percent of Mexican truck owners have one truck, little insurance,and no desire to travel north to a land whose language they do notknow. Thus the shortage of drivers north of the border is balancedby an equally serious dearth of drivers willing to go north.Opening the border is unlikely to result in a flood tide in eitherdirection.

Progress in Mexico

NAFTA encouraged sweeping changes south of the border as well.In 1989 the Mexican trucking industry was deregulated, allowing thenumber of carriers to balloon from about 350 servicing monopolisticroutes to 50,000 carriers with Mexico-wide authority. The mostsignificant difference between Mexican carrier deregulation andderegulation in the United States and Canada in the l980s lies inthe administrative control of tariffs and transportation contractsstill exerted south of the border.

At the same time, the Mexican government moved to improve itshighway infrastructure. The Toll Highway Development Program,initiated in 1989, led to the construction and operation of morethan 5,000 miles of highway. Unfortunately, the high fees assessedby toll road operators have led many Mexican carriers to continueutilizing the non-toll federal highway system. Many issuers ofbonds have, in fact, defaulted on their construction bonds. As aresult, the infrastructure, although showing great improvement, isstill far from the levels to which most U.S. and Canadian carriersare accustomed. Despite these difficulties, there has been asignificant investment in Mexico's logistics infrastructure,including motor carrier terminals, roads, bridges, andcarrier-support services.

In addition to its high cost, fuel poses another problem: sulfurcontent of Mexican diesel fuel is higher than the maximum levelsallowed by the U.S. Department of Transportation for the domesticU.S. market. Truckers have feared that the high-sulfur diesel wouldreduce the efficiency of U.S.-based carrier equipment, and thelow-sulfur diesel of the United States could have a similar effecton Mexican equipment if either crossed the border under the termsof NAFTA.

Critics of trucking liberalization continually raise safetyissues. They paint a picture of decrepit rigs in the last stages ofdecay and unsafe at any speed. In fact, the older trucks in theMexican fleet are concentrated in the drayage corridor outsideLaredo; they never penetrate farther north. Long-haul Mexicantrucks have become more modern, hence safer, over the past fewyears. The inspector general (IG) of the U.S. Department ofTransportation has noted that the failure rate for Mexican trucksin California during 2000 was 27 percent, close to the U.S.national failure rate of 24 percent. The IG also reported that thefailure rate for Mexican trucks had decreased from that of thepreceding year.

In preparation for the Supreme Court's decision, the U.S.Department of Transportation recently announced that it wasprepared to begin immediately inspecting Mexican buses and trucksto allow them to provide services between Mexico and the UnitedStates. There is nothing in NAFTA that will prevent inspectors fromfully enforcing U.S. air quality and highway safety standards.

Conclusion

The preceding survey of the issues related to trucking that havebeen plaguing the Mexican border for so many years suggests onceagain the folly of protectionism. The ongoing vendetta againstMexican trucking has raised prices in the United States whilediscouraging the trucking industry south of the border. The effortsto prohibit Mexican drivers may have shielded American Teamsters,but they have certainly raised Mexican hackles. Given the currentproblems in foreign policy, it seems especially unwise tounnecessarily alienate an important neighbor to the south.

At the same time, when considering the difficulties along theborder, it is worth noting the assiduity with which the truckingindustries on both sides have managed to ameliorate problems and toforge ahead, despite the obstacles. A clear pathway from Canadathrough Mexico to Latin American may still be only a rosy vision ofthe future, but that vision is alive and well.

The Supreme Court has given greater substance to that vision byupholding NAFTA and allowing Mexican trucks to operate freely inthe United States if they are in compliance with our regulatorystructure. In deciding for the Department of Transportation, theCourt has removed the remnants of trucking regulation and openedthe doors to market solutions. It has clarified in no uncertainterms this country's support for free trade and the benefits thatsuch trade confers.


[1]The firstregulation would establish an application process for Mexicantruckers seeking permission to travel outside U.S. cities andcommercial zones along the border, and a separate applicationprocess would be set up for trucks that would remain in the borderareas. The application process would require Mexican carriers tofile reports on their safety practices, certifying that they followsafety regulations while in the United States. Finally, Mexicantrucking companies would have to complete a safety audit every 18months that would include information on maintenance and repairs tovehicles as well as information about the drivers.

Cassandra Chrones Moore, an adjunct scholar with the Competitive Enterprise Institute, is an expert on trucking, trusts, and the environment.