North American Free Trade Agreement (NAFTA) Implementation: the Future of Commercial Trucking Across the Mexican Border

Publication Date: September 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Trade

Type:

Coverage: Mexico

Abstract:

NAFTA set forth a schedule for implementation of its trucking provisions that would have opened the border states to cross-border trucking competition on December 17, 1995 and all of North America on January 1, 2000, but implementation has been stalled for nearly nine years. The U.S. Department of Transportation (DOT) announced that until safety concerns about Mexican trucks were resolved, the trucks would continue to be restricted to the commercial zone just along the border. Congress addressed these concerns in the FY2002 Department of Transportation Appropriations Act (P.L. 107-87). The act set 22 safety-related preconditions for opening the border to long-haul Mexican trucks. On November 27, 2002, the Secretary of Transportation announced that all the preconditions had been met and directed the Federal Motor Carrier Safety Administration (FMCSA) to act on the Mexican applications. However, on January 16, 2003 the Ninth Circuit Court of Appeals in Public Citizen v. Department of Transportation, delayed implementation pending completion of environmental impact statements and a Clean Air Act conformity determination on the FMCSA's implementing regulations. On June 7, 2004, the U.S. Supreme Court, in a unanimous decision, reversed the decision of the 9th Circuit Court.

When the regulations are ultimately implemented, the short term impact of implementation is expected to be gradual as Mexican firms deal with a number of stumbling blocks including a lack of prearranged back hauls, higher insurance and capital costs, as well as costly border processing delays. In the long run, Mexican drivers and trucks will continue to dominate the crossings at the border, but the pattern of operation will change. The use of drayage companies whose trucks shuttle loads back and forth across the border 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. Operating beyond the border states at a profit would almost always require an arranged back-haul. In contrast, relatively few U.S. firms are expected to apply for operating authority in Mexico. Most are expected to operate through their Mexican subsidiaries or partners.

With the U.S. committed to implementing NAFTA, most ongoing issues of interest to Congress are issues of oversight. The most immediate issue is oversight of implementation on the U.S. side of the border within the context of U.S. treaty obligations and the safety enforcement preconditions Congress set forth in the FY2002 DOT Appropriations Act. Mexican implementation may become a major oversight issue. The Mexican government, as of this writing, has not established the regulations to process U.S. firms' applications to operate in Mexico. Other oversight issues include whether the role of Mexican customs brokers and drayage operators in cross-border trade is a barrier against U.S. trucking firms; the possible illegal operation of Mexican trucks in the United States; and the leasing of Mexican trucks and drivers by U.S. firms for use in the United States. This report will be updated as warranted by events.