Thread: Deal ends U.S.-Mexico dispute over truck inspections at bord

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MEXICO CITY:
Deal ends U.S.-Mexico dispute over truck inspections at border
THE NEWS TRIBUNE
Published: February 23rd, 2007 01:00 AM


U.S. safety inspectors will be allowed to examine Mexican trucks before they enter the United States under a program announced Thursday that could end a seven-year dispute.
Speaking at a trucking company in Monterrey, U.S. Transportation Secretary Mary Peters and her Mexican counterpart, Luis Tellez, said the deal would remove the last barrier to the long-delayed opening of U.S. highways to Mexican truckers.

The Associated Press

the deal would remove the last barrier to the long-delayed opening of U.S. highways to Mexican truckers.

Ugh!

Get ready for unprecedented numbers of jacknifed trailers and hazardous cargo spills.

U.S. safety inspectors will be allowed to examine Mexican trucks before they enter the United States under a program announced Thursday that could end a seven-year dispute.

This spells disaster for human cargo smugglers. Safety inspectors will be bought off at the border which equates to no more desert crossings on foot.

More government control to make sure the master plan comes together.

Mexican trucks = Buses without windows.

Hmmm.........sounds like another step toward the NAU to me.

America truckers unions can't be very happy about this, can they?

CG wrote:

Get ready for unprecedented numbers of jacknifed trailers and hazardous cargo spills.

More importantly, get ready for more American deaths on our highways. Something tells me these Mexican truckers won't be held to the same standard as our own truckers.

It would appear as if this is the finishing touches on a project that started over 5 years ago:

Before & NAFTA: Open Borders, Long Term Effects on Long-Haul Trucking
By Stewart Eisenhart
February 11, 2002

Now that Congress and the Bush administration have struck a deal to pave the way for NAFTA trucking provisions—which the U.S. had been found to be violating for most of last year—the task of actually implementing these provisions looms, and it will take more than political negotiations to prove successful.

After months of stalemate in Congress due to insurance and safety concerns, a compromise was reached last November to allow U.S. and Mexican trucks to cross their respective borders and ship goods anywhere in the NAFTA territories. According to the proposal, borders will open in May 2002, provided safety requirements certified by the Department of Transportation (DOT) are being met. That doesn't necessarily mean that Mexican trucks will be headed for Nebraska, or that U.S. trucks will start long-hauling to the Yucatan, overnight. The requirements of the compromise—mandatory inspections of Mexican trucks prior to entry into the U.S., mandatory submissions of Mexican drivers' licenses for electronic verification—are tall orders, and fulfilling them could prove a Herculean feat. And then there's the matter of insurance…

The difficulties regulators and companies face in implementing the new provisions were listed in a detailed report by the General Accounting Office (GAO) last winter. The report predicted few Mexican carriers would begin immediately sending trucks beyond border commercial zones due to several factors: difficulty finding competitively-priced insurance; lack of business relationships beyond commercial zones that would facilitate drivers' return to Mexico with cargo; border traffic congestion hurting profitability of long-haul operations; and costly registration fees.

In addition, the GAO pointed out that the transportation department has no approved plan to ensure Mexican carriers' compliance with U.S. safety standards, and only one border state, California, has set up permanent inspection facilities. The DOT also has yet to finalize agreements with all border states to share inspection responsibilities between 58 federal inspectors and 89 state inspectors.

The Mexican government has reportedly developed truck safety regulations to help bring the country's vehicles into compliance with U.S. standards, but it remains to be seen whether they will prove effective.

Insurance stays 'under the radar'
While issues of truck safety and inspections took center stage in the political debate last winter, the matter of long-haul trucking insurance has been much less conspicuously negotiated for several years.

As previously reported in the Insurance Journal, the Tri-national Insurance Group was set up not long after the Clinton administration and Congress passed the first NAFTA resolution to help develop cross-border insurance between the U.S. and Mexico. Dave Golden, director of commercial lines for the National Association of Independent Insurers (NAII) and a member of the group, noted that while regulators and legislators wrangled over safety issues, insurance stayed under the radar, with headway being steadily made to set up enforceable coverage for cross-border trucking companies.

Early last year, the Tri-national group unveiled a proposal to phase in cross-border insurance over a period of years; in the short term, brokering arrangements already set up between U.S. and Mexican insurers would be utilized. According to Golden, these arrangements allow long-haul carriers to obtain commercial auto coverage on an annual basis for travel within the limited commercial border zones. Currently, coverage for interior trucking is handled primarily by managing general agencies with presence in both countries. As is the case with any new market, whether or not more insurers and agencies get involved will depend on demand. There is now a limited number of Mexican trucking companies seeking interior coverage—between six and 10 companies now engage in cross-border shipping—and expectations are that demand will remain low.

In the short term at least, NAFTA's effects on long-haul capacity will likely prove minimal. Over time, however, Golden suggested that if enough trucking companies find profit potentials by hauling beyond commercial zones, more companies could follow suit, and insurers could then increase capacity.

Assuming demand for cross-border coverage does eventually grow, implementation of the second phase of the group's proposal would follow. It allows for fronting arrangements under which U.S. carriers would reinsure Mexican insurers with trucking customers traveling in the American interior and Mexican carriers would reciprocate with by reinsuring Mexican travel by customers of U.S. insurers. Implementing the second phase would require some loosening of current reinsurance laws.

The final, and most ambitious, phase of the plan involves setting up a mutual recognition agreement between the U.S. and Mexico similar to that now in place between the U.S. and Canada, which validates individual commercial coverages regardless of where they were written. However, laws forbidding foreign insurance in Mexico would first have to be addressed.

Roadblocks: Mexican law, competition
David Love, executive vice president and national director of transportation and commercial lines for San Antonio-based Vista Insurance Partners, echoed the NAII's wait-and-see approach regarding cross-border insurance. Love leads Vista's new national transportation division, which focuses on long-haul and intermediate trucking, and has brokerage, binding authorities and reinsurance facilities.

Although the formation of the new transportation division occurred shortly after Congress and the White House forged a compromise on NAFTA and trucking safety issues, Love downplayed the coincidence, saying the NAFTA issue had "no part in Vista's transportation initiatives." The move, he explained, had more to do with the company's long-term plans. "We are changing direction and expanding Vista nationwide."

Love noted, however, that many U.S. insurance carriers remain hesitant to ramp up their cross-border business: "I don't think the roadblock has been an American carrier's unwillingness. It's Mexican law. In order to obtain liability, coverage must be bought in Mexico."

According to Love, various issues must first be resolved for U.S. trucking companies to consider hauling beyond Mexico's border areas. "Some Mexican carriers are every bit as good as American carriers," he said. "Do U.S. truckers really want to compete there?" Transportation infrastructures differ vastly between the two countries, as well. In addition, freight-forwarding systems are already in place, in which Mexican trucks haul shipments to the border, where the goods are loaded onto U.S. trucks for shipping beyond the commercial zones.

"It will be years before the logistics are figured out," Love said. "Partnerships are more likely to form between trucking carriers in Mexico and the U.S." He concluded that essentially, there exist two major challenges to setting up cross-border insurance. One is the practicalities of aligning trucking operations of two different countries—despite last winter's safety compromises, there won't be a slew of trucking companies lining up overnight to take advantage of new open-border policies. The second pertains to the rules insurers are faced with in Mexico. Because only Mexican insurers can provide coverage within that country, only larger carriers able to maintain partnerships with companies there would be able to increase commercial auto lines for U.S. clients shipping to the Mexican interior. The Tri-national Insurance Working Group hopes to change that, but only if demand for more cross-border coverage increases.

Evolutionary, not revolutionary
Like Vista and NAII, the American Trucking Association (ATA) anticipates no major changes, at least for the short term, in cross-border shipping or insurance. Martin Rojas, director of cross-border operations for ATA, explained that any changes brought on by the new NAFTA provisions would be gradual: "Carriers are reconsidering how they can best use the opportunities NAFTA provides in regard to trucking.

"The process is going to be more evolutionary than revolutionary," Rojas said. "For Mexican carriers to come into the U.S., they aren't used to our universe of regulations at the local, state and federal level. They really deal with a single federal regulatory environment. Very few Mexican carriers will be able to operate safely—few will take advantage of the open border."

Rojas also pointed out the challenges U.S. truckers face heading into Mexico: "When we look at U.S. carriers going into Mexico, they face some questions, too. Do they want to send their equipment into Mexico, with different infrastructure, different facilities, fewer truck stops?"

As for insurance for cross-border trucking, Rojas doubts capacity will increase if the number of companies actually interested in trucking beyond borders remains small. "It will be such a small number of carriers that it won't have that much effect on the commercial auto market," he stated. "They're not going to be market makers."

Illustrating his point, Rojas explained that compared to some 500,000 trucking companies in the U.S., there are only about 8,000 in Mexico, and only 2,000 of those go beyond regional, owner-operated concerns. The entire Mexican operating fleet totals 410,000 units, about 160,000 of which are Class A trucks. There are 2.8 million Class A trucks alone in the U.S.

A major challenge faces regulators, trucking companies and insurers as they work towards enacting the new NAFTA provisions. The U.S. trucking fleet dwarfs that of Mexico, but because only Mexican insurers can legally provide coverage within its borders, many trucking companies may find it too cumbersome to extend their operations beyond the border. Mexican truckers, on the other hand, may want to extend long-haul shipments beyond the U.S. border, but their relatively small number, as well as the heretofore lack of uniform safety requirements for Mexican vehicles, present serious obstacles. Smaller fleets could mean difficulty operating effectively in larger areas, and as yet unproven safety standards could mean prohibitively expensive insurance coverage.

The compromise struck between the Bush administration and Congress last November was hailed as a major breakthrough—and it was, from a political standpoint. Borders may soon be officially open, but it remains to be seen whether and how many trucking companies will eventually take advantage of them. Also remaining to be seen is the true effect the opening of the nation's borders will have on long haul trucking insurance. For now, it's business as usual.

http://www.insurancejournal.com/magazin ... /18807.htm