U.S. Mexico Cross-Border Shipping White Paper

Brief

Understanding what can happen at the U.S.-Mexico border with your truckload shipments could impact the decisions you make—and whether or not you will actually get what you pay for. By reviewing the process and our options, you will be able to develop better, more efficient strategies to help minimize costs and risk.

Contents

• Cross-border shipping: A primer
• Northbound shipments, step by step
• Southbound shipments, step by step
• 7 tips for choosing a cross-border provider

The strong trading relationship between the United States and Mexico dates back many years. If you’re not already shipping products via truckload across the U.S.-Mexico border, it may only be a matter of time considering Mexico started 2023 as the United States’ top trading partner.1 One reason for such strong trade between the two countries is the practice of nearshoring—transferring business operations to a nearby country over a more distant one.

This white paper explains the process and options of shipping freight across the U.S.-Mexico border—northbound, southbound, transload, and direct. This information can help you evaluate your current cross-border shipping strategy and adjust for optimal savings and efficiencies.

There are two distinct methods of truck transportation across the border: transloading and direct service.

In transloading, product is transferred from one trailer or container to another at a warehouse or terminal then taken to the final delivery. In direct service, a trailer or container crosses the border on the same trailer or container from origin to destination.

When choosing between direct shipment and transloading, remember that:

• Customs requirements for both the U.S. and Mexico are exactly the same for direct and transloaded shipments.
• There are two brokers of record involved with both types of shipments, one for U.S. customs and one for Mexico customs.
• Shippers often select their preferred shipping method because of insurance, capacity, cost, cargo handling, and security considerations.

Figure 1: Primary land-border crossings (U.S.-Mexico)

Cross-border shipping: A primer

These four factors affect almost every cross-border shipment.

1. Carrier restrictions create the need for three carriers on almost every load
By Mexican law, a U.S. carrier’s tractor can only travel 26 km inside the Mexico border (the distance varies slightly, depending on the point of entry). Mexico carriers face similar restrictions in the United States.

As a result, U.S. carriers pick up and deliver on U.S. soil, and Mexico carriers pick up and deliver within Mexico. Both Mexico and U.S. dray carriers (sometimes called border transfer carriers) are allowed to haul freight within 26 km on either side of the border.

Figure 2: Carrier touchpoints

2. Mexico and U.S. customs approach inspections differently, based on each country’s issues and goals.

Northbound

Most imports into the United States from Mexico are duty free and the U.S. collects very little money at the bridge crossing for northbound shipments from Mexico.

Trucks are seldom physically unloaded and inspected on northbound moves; the U.S. tends to x-ray shipments and uses dogs to check for drugs, smuggled goods, and people. Then the freight is released into the United States.

Southbound

Mexico collects a VAT on definitive imports. Because the VAT is a large revenue source for the country, Mexico customs is especially vigilant about inspecting southbound shipments from the U.S. into Mexico.

The importer of record in Mexico must appoint a registered Mexican customs broker to clear shipments on their behalf. Both the Mexico customs broker and the Mexico importer of record are legally responsible for compliance with Mexico customs regulations.

The Mexican customs broker will file the required Mexican import entry filling (Pedimento de Importacion), along with documentation (commercial invoice, bill of lading, value declaration letter, trade agreements if applicable, and other requirements) for all commercial crossings.

The Mexican customs broker must physically inspect the commodities (Previo de Mercancias) prior to the Mexican Entry Document (Pedimento) filing. If the commodities are not tagged, part numbers are not visible, or other information is missing during this inspection, it may result in longer times to release goods from customs.

These regulations are very strict and require total compliance. Failure to comply can result in fines, delays, and ultimately, revocation of importers’ licenses.

Figure 3: Inspection points

3. Carriers are not obligated to carry cargo insurance in Mexico

Carriers in the U.S. are required by law to carry cargo insurance; Mexico carriers are not. In order to cover the value of freight while it’s in Mexico, many shippers add a separate endorsement on their global insurance policy for cargo insurance.

Such policies can include exclusions (e.g., coverage will be made for team drivers only, private toll roads only, etc.). The best practice is to carefully review your policy to understand any exclusions from coverage.

What this means on northbound shipments:

• Direct: Shortages within pallets, missing pallets, and damages can remain hidden until the product is unloaded at its destination. There is usually no way to prove where overages, shortages, or damages (OS&Ds) occurred. The burden of proving whether the incident occurred in the U.S. or in Mexico falls on the claimant and is required to collect on a claim.
• Transload: The company performing the transloading should verify the condition of the cargo as soon as it enters the U.S. If there is OS&D, documentation of transloading can help the shipper prove the damages occurred in Mexico before the trailer crossed into the United States, maintaining the validity of the U.S. cargo insurance.

Figure 4: Mitigating risk

To maintain the validity of U.S. cargo insurance on a northbound move, the transload company should verify the cargo’s condition at the U.S. warehouse. Under the eyes of a closed-circuit video camera, the warehouse provider can break the seal, take digital photos inside the trailer, document condition of freight before the trailer is unloaded/reloaded.

4. Equipment availability varies widely for direct and transloaded shipments

Direct service is often considered a premium cost service, best used for large, heavy freight like machinery, equipment that requires specialized equipment for unloading, or fragile cargo.

In direct service, the same trailer will be used from origin to destination; only the tractor unit changes. U.S. carriers that offer direct service will negotiate interchange agreements with Mexico interline carriers, assigning responsibility for their trailers.

Only the linehaul carriers that have an interchange agreement with the trailer owner can haul the trailer. The result of this relationship means there are a limited number of direct trailer providers and a limited amount of direct equipment available.

Transloads leverage Mexico and U.S. backhaul carrier opportunities. With transloading service, the U.S. carrier and Mexico carrier are selected independent of any relationship between the two.

Tens of thousands of U.S. domestic and Mexico domestic carriers could be matched together to offer transloading service. As a result, there are more combinations of U.S. domestic and Mexico domestic carriers and a correspondingly larger pool of available capacity

Cross-border shipping is complex

There are good reasons to use direct shipping, and good reasons to use transloading service. Review these step-by-step processes for northbound and southbound shipments. When you understand how cross-border business works, you can make informed decisions and reap the rewards—a more efficient supply chain with greater potential of minimized risk.

Northbound truckload shipments, step by step

Southbound truckload shipments, step by step

7 tips for choosing a cross-border truckload provider

1. Flexibility
   When a provider offers both direct and transloading services, they’re able to meet service requirements for a larger spectrum of shipper needs.

2. Bundled services
   Providers that bundle customs brokerage services with transportation offer single-source accountability for all of your cross-border shipments.

3. Capacity
   The best providers have developed working relationships with many carriers on both sides of the border to boost your buying power and provide equipment with ease.

4. Cross-border locations
   When difficulties arise, a large, reputable, and experienced provider with employees and offices located on both sides of the border will be located at the heart of the action to represent your interests.

5. Improved security processes
   Idle freight runs the risk of being tampered with. A good cross-border provider will offer measures and processes to decrease idle time and improve freight security, including stringent examination processes and secure drop lots/drop trailers.

They can track freight, require that drivers only refuel at approved locations, investigate any unexpected delays, and offer freight escorts.

6. Information and collaboration
   Expect your provider to be on your side in continuous improvement, delivering information and reports about every cross-border transaction.

7. Consolidation
   Your less than truckload (LTL) LTL shipments can be combined with other shippers’ partial loads to create full truckloads at the border and produce savings.

1. U.S. Trade Numbers, “Mexico Total Trade,” https://ustradenumbers.com/country/mexico/.