North American Free Trade Agreement (NAFTA) Implementation : The Future of Commercial Trucking Across the Mexican Border (RL31738) / John Frittelli.

Format:

Book

Author/Creator:

Frittelli, John, author.

Series:

CRS report for Congress.

CRS report for Congress

Language:

English

Subjects (All):

Free trade--North America.

Free trade.

Physical Description:

1 online resource (28 pages).

Place of Publication:

Washington, D.C. : Congressional Research Service, 2010.

Summary:

NAFTA set forth a schedule for implementing its trucking provisions that would have opened the border states to cross-border trucking competition in 1995 and all of North America in 2000, but full implementation has been stalled because of concern with the safety of Mexican trucks. Congress first addressed these concerns in the FY2002 Department of Transportation Appropriations Act (P.L. 107-87) which set 22 safety-related preconditions for opening the border to long-haul Mexican trucks. In November 2002, the U.S. Department of Transportation announced that all the preconditions had been met and began processing Mexican applications for U.S. long-haul authority. However, a suit over environmental compliance delayed implementation further. After the suit was resolved, in February 2007, the U.S. and Mexican Secretaries of Transportation announced a demonstration project to implement the NAFTA trucking provisions. The purpose of the project was to demonstrate the ability of Mexico-based motor carriers to operate safely in the United States beyond the border commercial zones. Up to 100 Mexico- domiciled carriers would be allowed to operate throughout the United States for one year and Mexico would allow the same for up to 100 U.S.-based carriers. With passage of the U.S. Troop Readiness, Veteran's Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (P.L. 110-28), Congress mandated additional requirements before the project could begin. After failing to defund the demonstration project in the FY2008 Consolidated Appropriations Act (P.L. 110-161), Congress succeeded in terminating the demonstration project through a provision in the FY2009 Omnibus Appropriations Act (P.L. 111-8). Subsequently, Mexico announced it would retaliate by increasing import duties on 90 U.S. products. The Obama Administration has indicated it intends to propose a revamped program that will address the concerns of Congress. The FY2010 Consolidated Appropriations Act (P.L. 111-117) passed in December 2009 did not preclude funds from being spent on a long-haul Mexican truck pilot program, provided the terms and conditions stipulated in section 350 of P.L. 107-87 and section 6901 of P.L. 110-28 were satisfied. One truck safety statistic, "out-of-service" rates, indicates that Mexican trucks operating in the United States are now safer than they were a decade ago. The data indicate that Mexican trucks and drivers have a comparable safety record to U.S. truckers. Another study indicates that the truck driver is usually the more critical factor in causing accidents than a safety defect with the truck itself. Service characteristics of long-haul trucking suggest that substandard carriers would likely not succeed in this market. As shipment distance increases, the relative cost of trucking compared to rail increases, and thus shippers utilizing long-haul trucking are willing to pay more because they require premium service, such as precise delivery windows or cargo refrigeration. These exacting service requirements would seem to disqualify truckers with unreliable equipment or incompetent drivers. In contrast, the short-haul "drayage" carriers that Mexican long-haul carriers would displace, typically use older equipment because of the many hours spent idling awaiting customs processing at the border. If Mexican carriers do eventually receive long-haul authority, the short term impact is expected to be gradual as Mexican firms deal with a number of stumbling blocks, including lack of prearranged back hauls and higher insurance and capital costs, in addition to the customs processing delays. In the long run, use of drayage companies is likely to decline as they lose part of their market share to Mexican long-haul carriers. The most common trips for these carriers will probably be from the Mexican interior to warehouse facilities on the U.S. side of the border or to nearby cities in the border states.

Contents:

NAFTA's Commercial Trucking Provisions: Background and Implementation History 1

Demonstration Project Results after One Year 5

Truck Safety Linkage to Service Characteristics 6

"Long-Haul" Trucking Defined 6

Short-Haul Trucking over the Border 7

Determinants of U.S. Truck Safety and Applicability to Mexican Carriers 8

Mexican Truck Out-of-Service Rates Comparable to U.S. Trucks 9

Cross-Border Trucking Operations: An Overview 11

The Scope of Cross-Border Truck Traffic 11

Cross-Border Commercial Trucking: The Trade Flow Process 13

Mexico-U.S. Crossings 13

U.S.-Mexico Crossings 14

The Maquiladora Exception 15

Hazardous Materials and Agricultural Trade 15

The Border's Distinctive Institutions: Drayage and Mexican Customs Brokers 16

Drayage: Deadheads and Bobtails 16

Mexican Customs Brokers 17

Traffic Congestion 18

Mexican Trucks Illegally Operating Beyond the Border Zone 18

The Outlook for Commercial Trucking Under NAFTA 19

The Short Term: Expectations and Limitations 19

The Short Term Prospects for Mexican Long-Haul Trucking in the United States 19

The Short Term Prospects for U.S. Long-Haul Trucking in Mexico 21

The Short Term Outlook 21

The Long Term: Business Structure and Competition 22

The Cross-Border Business Paradigm 22

The Low Cost Producer: Time and Distance Is Money 24

The Distinctive Institutions 26

Caveat 26

Congressional Issues 27

Figures

Figure 1. Incoming Truck Movements from Mexico (thousands), 1987-2007 11

Figure 2. Top Ports for Transborder Merchandise Freight by Truck: 2006 12

Tables

Table 1. Roadside Inspections of Trucks Operating in the United States by Country of

Domicile: 2004 to 2008 10

Congressional Research Service

NAFTA Implementation: The Future of Commercial Trucking Across the Mexican Border

Contacts

Author Contact Information 28.

Notes:

Description based on online resource; title from PDF title page (Congressional Research Service, viewed June 9, 2023).