Roads to common ground

| July 15, 2009

Ocampo is a veteran, with the company for 27 years. He’s hauled as far as New Jersey, Pennsylvania and other northeast U.S. states over the past five years in Quintanilla International company trucks, American-market trucks conforming to EPA emissions requirements and painted in an eye-catching bright base yellow with professional black lettering and striping. The trucks are hard not to admire and hard to miss, as is the presence of both Mexico and Texas plates. Ocampo says he routinely gets pulled over on any new lane but has encountered no major problems from American law enforcement. Though my conversation with Ocampo was conducted through a translator, he says he’s able to communicate effectively in the English he knows and seemed to understand me as I spoke, if he couldn’t communicate his thoughts to me effectively in English. He says he doesn’t feel as if he’s taking away American jobs by driving in the United States.

While Ocampo has no great desire to become an American citizen or to even live on the U.S. side of the border, Quintanilla is looking into the possibility of helping his company’s U.S.-lane drivers get their immigration status as part of the program.

“I don’t pay much attention to the news,” says Dart Transit’s Kevin Smith, the company’s Texas short-haul operations and sales manager. “I feel like a lot of it’s agenda-driven by groups who are out to protect their own interests, quite frankly.”

When Smith was first tasked with assessing expansion of freight opportunities into and out of Mexico last October, the outcry from cross-border-trucking opponents was so loud “we went down [to Mexico] expecting the worst” in terms of equipment quality and other safety concerns. But, Smith reports, he returned “pleasantly surprised about the equipment and the drivers there,” which he deems on par with most in the U.S. from both standpoints.

Dart has since established a subsidiary in Mexico to arrange the Mexican legs of trips that now amount to about “80 loads a week through Laredo,” Smith says, “100 loads a week through El Paso” and some intermodal through Otay-Mesa. Dart interchanges its trailers with Mexican carriers on the other side, providing “door-to-door” service, Smith says. As with most moves, there are typically three tractors involved, including a border dray tractor.

Monterrey, Mexico-based Jose Lopez manages Dart’s business on the Mexican side. He says the current cross-border system is more advantageous than an open border for several reasons. “For U.S. carriers, it doesn’t make sense to take their tractors to Mexico,” he says. “Operational costs in the U.S. are so much higher than we have in Mexico.” He says the average driver in Mexico might make $1,000 a month and will be paid on a per-trip or percentage basis. While he cites the market freight rate from Nuevo Laredo to Monterrey, Mexico, as $250 – for a distance of about 160 miles – a driver might only walk away with 10 percent of that, about 16 cents per mile. “U.S. drivers can make up to $70,000 a year in teams. If you think of your costs, it doesn’t make sense that you’re paying that much money to a driver to run in Mexico when you can just hire a service to remain competitive. If you use your own assets, you can’t remain competitive.”

Economies of scale in turn limit Mexican firms’ willingness and ability to operate north of the border. “The biggest Mexican companies already own trucking companies in the U.S.,” says Lopez, but “a huge company here might own 1,000 tractors. Their monetary power is not the same [as that of large U.S. carriers].” To compete along the lane between Monterrey and Chicago, for instance, “they would have to have clients in Chicago to get a load back – you have to have a sales force to get those clients. They would have to invest in infrastructure – create operational centers and trailer stops.” U.S. insurance, he says, is yet another added expense for a Mexican carrier. He says these facts can help explain in a broad way the marginal participation in the cross-border demonstration project. “Nobody was willing to do all of that” for a program that, as feared, has turned out to be temporary, at least for the participating Mexican carriers.

Both Quintanilla and Gaona echo that sentiment, finding there the “common ground,” as Gaona calls it, that might allow trucking industry stakeholders to move beyond political invective and to a final solution to the current cross-border dilemma. “We can’t do without Mexico because Mexico’s one of our biggest customers,” he says, “so let’s stop badmouthing them and reach an agreement. It’s up to our government to reach a common ground so we can all stay in business.”

For trucking companies, the “common ground” might well be that the costs and risks involved for any company operating on the opposite side of the border are prohibitively high, and the need for high levels of security at the border further complicates the picture.

On an elemental level, driver Javier Ocampo notes that friends of his with Transportes Olympic, one of the Mexican carriers involved in the demonstration project, complained they weren’t making the money they needed in cross-border long-haul due simply to the lengthy wait times at the border. Though Mexico has no formal log-book requirement for long-haul drivers, any driver on his way to the border is required by his company to keep a log that conforms to U.S. standards. “They get to the border and by the time they get across the border they’re out of hours,” Ocampo says, “and are waiting [on the U.S. side] through the following day.”

The exploding drug-cartel violence along the border and fears of a swine flu pandemic had added to those wait times in May, Quintanilla said, further complicating the attractiveness of true cross-border long-haul.

At press time, U.S. DOT Secretary Ray LaHood had suggested that a new cross-border project or paradigm could be in place by the end of June, and Mexican trucking association Canacar had announced it and 4,500 member carriers were suing the United States for $6 billion in relief for NAFTA violations. During his visit to Mexico in April, President Obama said attention to disparate emissions and labor standards should necessarily be a part of any new cross-border project.

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