Barriers Remain for Commercial Traffic Between Mexico and the U.S.

The North American Free Trade Agreement, signed in 1992 by the United States, Canada and Mexico, was implemented in an effort to eliminate or reduce trade barriers between the three participating countries. In the area of commercial transportation, long-standing agreements between Canada and the U.S. more or less allow unrestricted commercial traffic between these two countries. The situation is a little different, however, along the southern border of the U.S. Certain restrictions in both countries serve to slow down commercial traffic across the border between the U.S. and Mexico.

“In an ideal world we would like the insurance companies to follow the risk wherever it goes in the three countries … but we’re not there,” said Texas Insurance Commissioner José Montemayor, who chairs the National Association of Insurance Commissioners’ NAFTA working group. Members of the NAFTA committee include insurance commissioners from states along the northern and southern borders of the U.S.

“The showstopper has been an inability, particularly on the southern border, to follow the risk wherever it may go,” Montemayor said. “If I’m a Canadian insuring a Canadian transportation company, my coverage should be good enough to follow it wherever it’s going among those three countries, and to provide the necessary financial and civil responsibility requirements to enable them to get transportation permits.”

However, Montemayor added, “They are not able to do that once they get to the Mexican border.” He explained that the Mexican government reserved under the NAFTA agreement the ability to require traffic coming into Mexico–commercial or personal traffic–to obtain liability coverage in Mexico “through a Mexican person. And the person definition extends to companies. So the only ones able to provide civil responsibility coverage, for practical purposes, are Mexican companies. Going south both U.S. and Canadian companies have got to buy a different policy.”

Coming north, Montemayor said, Mexican insurers “have not been willing to follow the risk; they want to disengage coverage at the border. They are afraid of our tort system and some of the resulting judgments that have taken place in our country.”

Another barrier on the U.S. side are restrictions imposed by the U.S. Department of Transportation in the transportation permits required of both commercial trucks and tourists buses entering the U.S. from Mexico. The permits have “a lot of additional what’s called extra-contractual requirements on the insurer,” Montemayor said, particularly in the environmental area.

Montemayor said the U.S. DOT’s hazardous material list is also overly broad and contains no provisions for quantity. “This is particularly important on the southern border where they do partial assemblies, particularly for auto–the maquiladoras–where they basically take stuff back and forth. A pickup truck with one five-gallon can of paint is required to carry hazardous materials coverage [the same as] a truckload of paint. There’s no discerning amount. … What that means is that instead of a million dollars minimum liability requirement, you’re now required five. It considerably ups the ante in terms of the premium.”

He said the NAFTA working group is asking the U.S. transportation department to reassess some of its more restrictive requirements in order to ease the existing barriers to trade.

Topics USA Commercial Lines Canada Mexico