The provisions of the North American Free Trade Agreement have been in place for several years, but Mexico and the U.S. have yet to simplify cross-border shipping by implementing a feasible cross-border insurance system similar to that with Canada.
The issue is one that David Snyder, assistant general counsel of the American Insurance Association, said could be a violation of NAFTA itself. “At least the spirit if not the letter of the agreement is violated by each country not recognizing the other country’s insurance,” Snyder said. “This is an issue we are beginning to push harder on.”
The stumbling blocks to implementing a system of insurance reciprocity are numerous, though safety of Mexican trucks is still a major factor for U.S. officials.
“Before the transportation provisions of [NAFTA] are fully implemented, we need to address some unfinished business regarding the safety of trucks crossing the border,” Snyder said. “Independent studies on the safety of border trucking demonstrate that more inspection assets, better safety programs and safety regulations, which are harmonized up to the highest level, are all needed before further opening the United States to Mexican trucks. Progress has been made, but there is no evidence that adequate levels of safety can be assured.
On Oct. 13, the National Association of Independent Insurers (NAII) sent letters to presidential candidates Al Gore and George W. Bush, urging them to maintain the moratorium against Mexican trucks until safety standards are met.
As it now stands, a shipper generally deals with three trucking companies when shipping goods across the border. Cargo originating on the American side is shipped to a border town where it is detached from the tractor at a storage facility.
Another tractor, or dreyage, picks up the trailer and hauls it across the border to another storage facility where it is once again detached. Then a truck on the Mexican side picks up the trailer and hauls it to its final destination. The scenario is played in reverse for Mexican shipments to the U.S.
According to a study released in August by the Federal Motor Carrier Safety Administration, 40 percent of Mexican trucks entering the U.S. failed to meet safety requirements in 1999, dropping from 81 percent in 1998. But that is still too many trucks failing roadside inspections, according to Dave Golden, NAII director of commercial lines.
“Currently, the majority of trucks crossing the border are short-haul dreyage vehicles,” Golden said. “We have had indications from insurance colleagues in Mexico that the Mexican long-haul fleet is in much better condition and that these would be the vehicles traveling throughout the United States and Canada. What we need to see are inspection results that show that these long-haul trucks meet U.S. standards.”
Newt Cunningham, an attorney with Dallas-based Roberts, Cunningham & Stripling said safety is certainly a factor, but not the only one hindering free transportation of goods between the countries.
“There are probably eight or nine issues,” Cunningham, who represents trucking companies, said. “Only large shippers want the border opened to transport. What they are concerned with is the ability to deal with one vendor to provide services.”
The current system is economically preferable to the smaller, border-based trucking companies. It’s their bread and butter. And in some cases, it’s also preferable to insurers. “Generally, your dreyage truck is owned by the same company that owns the storage facilities [at the border],” Cunningham said. And those companies are fighting hard to ensure the system doesn’t change.
“Of course, it would be easier on the shipper if that truck just went through the border,” he said. “But I think the primary issue that’s keeping that from happening are the drug issues. Even if we could go through, we’d be tied down too long by the drug inspections.”
Cunningham also points to the historical fear that American truckers might run into problems with Mexican officials. There is also a shortage of trailers in Mexico, he said, meaning Mexican trucking companies simply could not compete if U.S. trucking companies were allowed free reign in Mexico. And Mexican insurers like insuring U.S. trucks traveling on Mexican roadways. Also, U.S. unions don’t want competition from Mexican drivers who will accept
lower wages.
“U.S. truckers don’t want the border open,” Cunningham said. “They’ll sit in a room with shippers and say they do, but they don’t.”
Floyd Woods, who writes tourist auto into Mexico through Sanborn’s Mexico Insurance Service, said insurance reciprocity across the border would require bringing Mexico into the 21st century on all levels.
“For example, generally, if you get your car repaired in Mexico, it’s a substandard repair,” he said. “People get back and want their car fixed again. We handle all our claims on the U.S. side.”
Similar situations could be faced by trucking companies and their insurers, for now that means insurers literally have to do business in both countries, with admitted operations set up on either side of the border. The system has resulted in reciprocity for large trucking companies. But for smaller truckers and those insurers without affiliates across the border, reciprocity remains an issue.
“The NAII Commercial Auto Committee, while supporting the free trade objectives of NAFTA, recognized that, with the election of a new president just weeks away, the question of continuing the moratorium will become a key decision for a new administration,” NAII’s Golden said.
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