Law Offices of Seaton & Husk, LP

Head for the Border?
Canadian and Mexican Shipments Remain Frustrating and Complex
By Henry E. Seaton
March 2001
Reprinted from etrucker.com

The recent announcements of expanded truck traffic between the United States and Mexico is hardly an end to difficulties in cross-border transportation. The North American Free Trade Agreement has been in effect for almost eight years, but truck transportation among the United States, Canada and Mexico is anything but seamless. Cross-border freight can be profitable, but you must understand the operational and legal pitfalls involved.

Operational hassles

The U.S.-Canadian border is open to carriers of both countries. U.S. carriers can obtain extra provincial authority from the various Canadian provinces for a nominal cost. Although there is an effort to standardize the applications of the various provinces, the forms can be confusing. For example, the Quebec request is in French; you may need help completing it. Border clearance can be tedious as well.

Customs and immigration restrictions also limit operational flexibility. U.S. drivers can't handle shipments between two points in Canada, and Canadian drivers -- unless they have green cards -- can't handle shipments between points in the United States.

U.S. and Canadian customs laws require carriers that want to bring in trucks or trailers to handle domestic shipments pay a duty to do so. The bottom line? Once a U.S. carrier delivers a shipment into Canada, it must either find a load back to the U.S. or deadhead across the border.

At the Mexican border, the recent NAFTA ruling and President Bush's response may open the border states and provinces, but don't expect the current system to change overnight. Until now, U.S.-Mexican freight has been interchanged at border cities. Shipments are either interlined or trailers interchanged there. This leads to unending congestion at the borders because so many trucks are just crossing the border and coming right back. Adding further to the congestion is rapid economic growth in the Maquiladoras -- Mexican industrial parks near the border.

A big concern in Mexico is trailer management. Mexican carriers often want to use U.S. carriers' trailers for pickups and deliveries in Mexico. But theft, damage and stolen tires are chronic problems.

Cargo liability

Perhaps even more troubling than the operational problems are the differences in cargo liability. In the absence of a contract that states otherwise, a carrier's maximum liability in Canada is $4.41 (Canadian) per kilo. In Mexico, the cargo limit of liability is based upon the fluctuating wages paid in Mexico City, amounting to no more than a few cents per pound. In the U.S., of course, we have unlimited cargo liability. Reconciling these standards can create a liability trap for the unsuspecting carrier.

The disparity between the U.S and Mexican laws in particular makes you a target if you haul goods on through bill to a Mexican destination. If the shipment is lost, damaged or stolen in Mexico, your Mexican interline carrier may offer you a few pesos, but the shipper will file a claim against you for the entire amount. Either refuse to haul on a through bill or make sure that you are fully protected against theft, damage or delay occurring in Mexico. Such coverage usually isn't cheap or easy to obtain.

You are at risk for shipments originating in Mexico as well. Because savvy shippers know they will get virtually nothing for loss or damage under Mexican law, they will try to stick you with the claim for damage to goods you picked up at the border. For this reason, it's vital that you thoroughly inspect the shipment at time of delivery.

Fortunately, the NAFTA countries are developing an international bill of lading intended to promote free trade, cut red tape and establish uniform rules of commerce. Under the proposed new regime, the cargo liability limits of the country of origin will apply, so at least you will know the risks.
For now, however, recognize that shipments to Mexico and Canada are big business with potentially big problems.