October 27, 2017

More Than 20 Years Later, Cross-Border Trucking Fight Under NAFTA Continues

Holland & Knight Transportation Blog
Jameson B. Rice

Major industry groups are lobbying the U.S. Trade Representative with respect to existing program that allows Mexican trucks to operate in the U.S under NAFTA. It is unclear what the cost to the U.S. would be if it were to cease allowing such operations.

As NAFTA negotiations continue, the American Trucking Associations (ATA) the trucking industry’s largest trade group  is advocating to keep in place a controversial program that allows Mexican trucks to operate in the U.S. by transporting international cargo to and from Mexico. The trade group wrote a letter to U.S. Trade Representative Robert Lighthizer arguing that such operations reduce border congestion. This is because the regulation allows Mexican carriers that drop off a load in the U.S. to pick up a load for the return to Mexico rather than returning empty. Trucks are inspected at the border whether empty or loaded, so it is more efficient to return loaded trucks, the ATA argues. Furthermore, the use of additional equipment and handling adds cost, increases the likelihood of delay and the potential for damage.

The Owner-Operator Independent Drivers Association (OOIDA)  the largest trade association representing small-business truckers and professional truck drivers -- in conjunction with the International Brotherhood of Teamsters  a labor union that represents truckers in the U.S. and Canada  also wrote a letter to the U.S. Trade Representative arguing that Mexican trucking companies are taking away jobs and profits from American drivers and motor carriers, while endangering the public. They argued further than there is little incentive for U.S. carriers to operate in Mexico, and that Mexican trucks have been a conveyance for contraband and undocumented immigrants.

Mexican-domiciled carriers may operate in the U.S. today if approved by the Federal Motor Carrier Safety Administration (FMCSA). This right arose from the first negotiation of NAFTA and has been hard-fought, as the following timeline demonstrates:

  • 1994 - NAFTA goes into effect, which included a phase-out of restrictions on cross-border carriage, first to border states and then the rest of the U.S.
  • 1995 - U.S. refuses to lift restrictions on Mexican trucks.
  • 2001 - NAFTA dispute settlement panel finds U.S. to be in violation of its NAFTA obligations.
  • 2002 - The FMCSA implements an interim final rule allowing cross border operation.
  • 2004 – the U.S. Court of Appeals for the Ninth Circuit sets aside the FMCSA rule, then the United States Supreme Court reverses the Ninth Circuit. See Dept. of Transp. v. Public Citizen, 541 U.S. 752 (2004).
  • 2007 - Congress requires that a pilot program be implemented before Mexico-domiciled carriers are permitted to conduct long-haul operations in the U.S. See Section 6901 of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007. A small pilot program allowing cross border carriage begins.
  • 2009 - U.S. removes funding for the pilot program and Mexico implements retaliatory duties on more than $2 billion worth of U.S. goods.
  • 2011 - another pilot program begins, and Mexico lifts its retaliatory duties.
  • 2015 - following the end of the pilot program and a report to Congress, the FMCSA begins accepting and processing applications for long-haul operating authority from Mexico-domiciled carriers.

Despite the arguments from both sides, and the effort exerted in allowing such operation, relatively few Mexican-domiciled carriers are currently operating in the U.S. –The FMCSA website lists 35 Mexico domiciled motor carriers as authorized to operate long-haul (Mexico-Domiciled Motor Carriers Authorized to Operate Long-Haul under OP-1MX Authority). Clearly, the ATA would like the possibility to see such operations expanded in the future, while OOIDA and the Teamsters are continuing the multi-decade fight to prohibit Mexican carriers from operating in the U.S. Some argue that excessive control reviews on behalf of U.S. authorities have become a deterrent for additional and existing Mexican participants. The U.S. Trade Representative is declining to comment at this time as to whether it intends to renegotiate this portion of NAFTA.

Whether or not the U.S. should stop allowing Mexican-domiciled carriers to operate in the U.S. should not be analyzed in a vacuum. If the U.S. does seek to end such operations, a countervailing response from Mexico will be expected. Since Mexico and the U.S. have not exchange any formal conclusion of the NAFTA dispute, Mexico could reinstate retaliatory duties at any time, even before any renegotiation of NAFTA is complete. Only at that point can the costs and benefits of such an action be evaluated.

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