The Mexican wave is only set to grow in strength, with more and more cargo moving south and north between the border. However, there are several challenges for logistics companies to contend with, to ensure that they keep costs low, security high, and importantly, make the border crossing as pain free as possible. These were discussed at last week’s webinar hosted by Automotive Logistics entitled ‘Maximising the cross-border supply chain’.
In the automotive world, all major OEMs either have existing plants in Mexico, or are in the process of building them. Tier one and two suppliers have also opened manufacturing sites over recent years with more plans in the pipeline. While GM, Ford and Chrysler have been operating in Mexico since the 1930s, and Volkswagen since the 60s, today, dozens have plants there. Moreover, serious investment is being made by OEMs, and Mexico itself, into infrastructure and transportation. The US is Mexico’s biggest trading partner, accounting for 77% of exports. In a month, Mexico exports more to the US than it does to all EU countries in a year.
Frank Bateman, director of customer logistics for Ryder Supply Chain, who conducted last week’s webinar, said, “[the] auto business is booming and the opportunities have never been bigger.” However, for companies moving freight between Mexico and the US there are five important considerations: mapping out the flow of materials, to create a better and more optimised way of moving freight; opening the lines of communication by identifying key players in the supply chain; avoiding border delays by understanding the documentation required and who provides it; using interchange agreements to eliminate border trans-loads; and increasing vigilance around security.
While there has been considerable investment in other modes, the vast majority of trade is still being moved by truck. Regarding Mexico’s infrastructure, Bateman said, “Mexico is on the right track and given the time they need, they will be ready on time,” but there is currently still a way to go.
Contingencies and communication
One of the biggest issues is the border itself. Bateman said that border crossing transit can vary wildly. While there are predictable factors such as the time of day, or busy shipping times, there are also unpredictable factors such as the weather, traffic, customs inspections, customs systems issues, or even protests. “Identify buffer time for contingencies,” recommended Bateman.
It is also important to maintain open lines of communication by identifying the key players in the supply chain, and identifying what their roles are, to minimise potential problems. A 3PL can help with this and provide end-to-end visibility through the control tower concept.
Planning is needed to ensure the easiest crossing. This involves deciding which port will be used, taking into account variations in hours of operation, congestion, bridge numbers, whether they allow commercial traffic etc. Along with planning the right port, the right documentation is also a necessary requirement. Going southbound, a NAFTA certificate is required once a year, along with a commercial invoice for raw material, and a proforma invoice. Customs brokers require a pedimento for Mexican importation, and a shippers export declaration for US exportation. Going north into the US, manufacturers require a NAFTA certificate, instruction letter, commercial invoice, proforma invoice, and packing list. Customs brokers require a pedimento for Mexican exportation, and entry manifest for US importation.
As Mexican trailers are not allowed to travel into the US, material must be reloaded to a US trailer at the border. To avoid wasting time and money on this, US and Mexican carriers can sign interchange agreements with one another, so one carrier can haul another’s trailers. This is typically a US carrier, as they are allowed into Mexico. This agreement forces both parties to come together and discuss aspects such as repairs, inspection reports, or wear and tear.
However, despite the possibility for interchange agreements, it will be difficult to facilitate multiple loads moving between Mexico and the US. On the Mexican side, every company riding on the trailer must have power of attorney with a shared Mexican customs broker, which Bateman explained is often not practical, and therefore means companies cannot share the conveyance.
According to Ryder, on a typical single day in 2013, customs and border processed more than 67,000 truck, rail and sea containers, and amost 270,000 incoming privately owned vehicles. Along with this, almost 5,500kg of drugs were seized, $291,000 in undeclared or illicit currency, and $4.7m worth of products with intellectual property rights violations. And with cargo, there is an increased risk of theft or smuggling.
Although improvements have been made, there are still issues with security in Mexico. “At some point in time, interior cities were considered higher risk and borders were more safe, then it switched and borders were considered risky while interior cities were considered safer,” said Bateman.
It is obvious further improvement is needed. In the central region of Mexico, there is a focus on cargo theft that needs to be addressed, and at the border into and out of Mexico, safety and security needs to remain a focus. Bateman added, “Safety and security has got better over the past couple of years and it will improve over time.”
To protect companies from security related issues, manufacturers are encouraged to carry out a comprehensive risk assessment, and install the correct infrastructure and systems, including CCTV, electronic card access control, and surveillance. There are also several US Customs sponsored programmes, including: the Customs-Trade Partnership Against Terrorism, C-TPAT; Free and Secure Trade for Commercial Vehicles (FAST); and the Business Alliance for Secure Commerce (BASC). In Mexico, there is the Nuevo Esquema de Empresas Certificadas (NEEC), which was started in 2012.
By 2020, experts are forecasting that truck trade between the US and Mexico could reach $463 billion. So for American companies that are interested in exporting and importing to Mexico, now is the time to look into the logistics of logistics.