Introduction
Anyone involved with exporting to Mexico via truck or rail has undoubtedly
experienced significant frustration at one time or another in dealing with clearing product through the border. These frustrations
are a result of seemingly excessive delays and high costs for crossing shipments. For many exporters their responsibility
for an export transaction to Mexico ends at the border, their contracted point of delivery. Exporters, traditionally, have
no or little control over the crossing process. Importers choose customs brokers and forwarders, pay duties and broker fees.
However, exporters are often dragged into the border crossing process when a problem arises.
This report will explain in general terms the border crossing process for
trucks entering Mexico. The report will be limited to the crossing process at the border port of Laredo, TX, the most important
and busiest U.S./Mexico land port (59% of the total of U.S. import-exports). While the process, in principal, is the same
for all border crossing ports, there can be operational differences and different cost structures depending on a number of
factors. Exporters should always contact the assigned broker and forwarder for their respective shipment to obtain the most
current information on import requirements and procedures at the time of export. The border crossing process for rail shipments
(1800 loaded railcars) is significantly different.
Border Crossing Process
Many visitors to Laredo, TX have undoubtedly seen and perhaps experienced
driving around the long line of trucks backed up for miles on I-35 waiting to cross into Mexico. In 2003, approximately 960,000
loaded trucks crossed southbound through Laredo, TX, a 20 percent increase from the 1999 level. The time it takes trucks to
cross the border into Mexico varies depending on the merchandise, time of day, and the day of week and even the time of year.
A shipment of processed food products could cross today in a few hours yet the same shipment could take several hours to cross
next week. Crossing times are a function of port infrastructure, government inspections, document clearance, importer's needs
and brokering and forwarding procedures. A shipment could be held up for days because of problems anywhere in the process.
Many delays can be avoided, however, simply through better communication between shipper, importer and broker/forwarder. This
is especially true for household goods, agricultural, fish and forestry products, where Mexican import requirements change
regularly and often without advance notice.
There have been a lot of reports, studies and discussions on why traffic
moves the way it does through the U.S./Mexican border. While it is important to understand these reasons to find long-term
solutions to border congestion, this report will focus on the border crossing process as it is now. Canadian and U.S. exporters
need to understand how this process functions in order to make better decisions on where, when and how to cross household
goods, agricultural, fish and forestry products into Mexico.
Border Crossing Mechanics
The following section will walk the reader through the steps of crossing
a shipment into Mexico through Laredo/Nuevo Laredo and explain where potential problems occur causing delays in moving the
shipment. Again, be advised that these steps are typical to the crossing process, but there may be variations depending on
the product shipped and the custom broker and forwarder used in the clearing process. To better understand the following explanation,
there are a few terms and definitions that the reader should know. 1. A forwarder is a U.S. company located on the U.S. side
of the border that receives a shipment and begins the clearing process. 2. A Mexican Customs Broker is the only legal Mexican
entity that can clear Mexican imports. 3. A truck or tractor refers to the vehicle that pulls trailers. 4. A trailer is the
means in which cargo is transported. 5. A bobtail is a tractor that moves from point A to point B without a trailer. 6. Drayage
is the process of moving a trailer a very short distance within the border city or across the border.
The process is divided into three phases with various steps in each phase.
Phase I:
Step 1. A long-haul trucking company delivers shipment/trailer to a forwarder
located on the U.S. side of the border.
Step 2. Upon delivery, the long-haul tractor and driver return with load
(backhaul) or empty trailer (deadhead) depending on availability. Driver could return as a bobtail, but this is not a common
practice.
Step 3. If trucking company has a local terminal, then driver and truck move
as bobtail to local terminal to wait for return load.
Step 4. Again, depending on availability, driver will return with load or
empty trailer. Phase I results in one tractor/trailer movement southbound, one bobtail movement and one tractor/trailer movement
northbound.
Phase II
The shipment is classified by the forwarding agent. This could entail fully
or partially offloading the cargo. Depending on the number of products in the shipment and the relationship the forwarder
has with the shipper, this process can take a few minutes or a couple of hours. The forwarder also arranges for transferring
the cargo to a Mexican trailer if necessary. For those Canadian and U.S. trailers entering Mexico a bond is purchased to secure
its return. Virtually all refrigerated shipments are transferred to Mexican trailers. The forwarder also arranges for the
Ministry of Agriculture (SAGARPA) inspection. Five inspection points of SAGARPA are operating at the Mexican bridges of Nuevo
Laredo and Colombia.
Step 5. During the forwarding process the Mexican broker is preparing import
documents, paying import duties and Customs fees. Once all documents are in order and duties and fees are paid, the broker
tells the forwarder to send the shipment across the border to be inspected by SAGARPA at the selected SAGARPA point of inspection.
The time taken to prepare and clear documents usually takes between 3 and 5 hrs if they are all in order.
Step 6. The forwarder arranges for another drayage tractor (bobtail) to come
and pick up the trailer (15 min. to 30 min.).
Step 7. Trailer is transferred to Mexico. The crossing time into Mexico can
take 15 min. or 3 hrs depending on the time of day crossing and the volume of traffic on the bridge.
Phase III
Once shipment is inspected by SAGARPA, it is presented to Customs at primary
inspection which is a booth located prior to entering the Mexican Custom's import lot.
Step 8. Mexican Customs keys the entry number from the import document (called
the Pedimento de Importacion) into the computer and if the shipment is not randomly selected for intensive inspection, called
green light, the shipment is released and the driver takes the trailer directly to the transfer lot. If the shipment receives
a red light, then it is sent to the Customs import lot for intensive inspection. At intensive inspection the shipment is fully
or partially unloaded, items are counted, labels are checked and documents are reviewed for compliance. Approximately 10 percent
of all loaded trucks are randomly selected for intensive inspection.
Step 9. If it passes, the shipment is cleared and released and the driver
moves to the transfer lot. Under Custom law and policy, a red light inspection must be completed in 3 hours of arrival at
the dock, but in reality it can take several hours depending on the workload and time of day crossing. Only unionized dockworkers
can offload and load shipments. Upon exiting the import lot, all red-light shipments are subject to secondary review. Only
10 percent of the shipments are stopped here. An independent private Mexican company for the purpose of auditing Mexican Customs
inspectors' work conducts this review. If stopped, the shipment is again unloaded and rechecked which can take between 1 and
3 hrs.
Step 10. Once cleared from secondary review, truck/trailer proceeds to the
transfer lot. This phase takes one tractor/trailer movement if the shipment receives a green light at Customs, or 2-4 tractor/trailer
movements if it receives a red light and it is stopped at secondary review. The transfer lot is a lot where drayage companies
deliver trailers to wait for Mexican long-haul trucking companies. Agricultural products, especially perishables, will normally
not sit for more than a few hours in the transfer lot.
Step 11. Transfer lots allow the drayage tractor to return to the United
States (bobtail) as soon as possible to retrieve another load.
Step 12. A Mexican long-haul tractor moves as a bobtail to the designated
transfer lot to pick up the trailer.
Step 13. Tractor and driver move to kilometer 26 check point (14 miles).
Step 14. At the kilometer 26 check point, Mexican Customs again scans the
pedimento to certify all the proper clearances are in order and then stamps the pedimento allowing it to enter the interior
of Mexico. If there is a discrepancy with the documentation, the shipment is returned to the Mexican Customs import lot on
the border. While the verification process is conducted in a matter of minutes, a shipment could be delayed for hours waiting
in line. This phase takes two bobtail movements and one tractor/trailer movement.
It becomes fairly clear from the crossing process explained above, that there
are a number of truck/trailer and bobtail movements associated with each shipment. Multiply this by 2618 southbound shipments
and another 1,855 northbound shipments each day and it is easy to see why there is so much congestion in Laredo. The vast
majority of all shipments that arrive in the morning, between 8:00 AM to 10:00 AM, cross into Mexico the same day between
4:00 P.M. and 8:00 PM. These crossing times are much better than the horror stories of waiting days and even weeks.
It should be noted here that usage of the bridges at Laredo is no where near
capacity if taken in the context of a 24-hour day. Currently in Laredo/Nuevo Laredo, Mexican Customs is opened from between
8:00 AM to 10:00 PM. for normal entry commerce. Perishable and maquiladora shipments can cross up to 12:00 PM. In the past,
U.S. and Mexican Customs tried to extend the hours of service, but the traffic never came. Given current brokering, forwarding
and banking practices, daily commercial border crossings have specific peak hours. According to the Laredo Bridge System,
approximately 60 to 65 percent of all southbound truck traffic crosses the border between 4:00 PM and 8:00 PM on any given
day.
Brokers and Forwarders
One of the most common complaints of the crossing process is broker and forwarder
procedure. Under Mexican Customs law, only a licensed Mexican broker can clear products for import into Mexico. A good broker
will save importers' money by making sure that all import requirements are met and those shipments clear without penalties.
The Mexican broker is a legal representative working on behalf of the importer.
It is the broker that prepares Custom's requested import document called
the “Pedimento de Importacion”. All Mexican brokers prepare and produce their own pedimentos from their offices.
In Nuevo Laredo, all brokers are electronically linked to the Nuevo Laredo Association of Customs Brokers (AAA), which provides
a pedimento number in the order they are requested. Once the broker has prepared and collected all documents, paid duties
and fees, he transmits the pedimento to Customs electronically via the AAA. The AAA is the only entity electronically connected
to Customs and charges $ 161.00 Pesos (15.00 Dollars) per “pedimento de Importación). Once Customs receives the pedimento
electronically, information about the shipment is entered into its system and the broker has three days to cross the shipment.
The forwarding process, unlike the brokering process, is not mandated by
Mexican law; it was created by Mexican Custom brokers. A forwarder is located on the U.S. side of the border and consists
of a small warehouse and offices. Upon arrival at the forwarder's facility, a shipment is classified, merchandise is counted,
labels are checked, required import documents are collected and SAGARPA inspections are arranged. Virtually all Mexican brokers
fully or partly own a forwarding company that they use exclusively for their respective shipments. There is no law that says
that imports must stop on the U.S. side of the border, but Mexican brokers claim that for them to be 100 percent sure that
they are in 100 percent compliance 100 percent of the time, they need to review shipments before they cross into Mexico. Under
Mexican Customs law, there are severe penalties for not complying with Customs regulations that are imposed on the Custom
broker and not the importer. Brokers/forwarders also say that Mexican importers like having product stopped at the border,
because if there are any problems, then it is cheaper to resolve them on the U.S. side of the border, especially if a shipment
must be returned to the exporter.
For all the bad publicity that brokers and forwarders receive, it is important
to remember that brokers and forwarders are providing a service. A needed service as a result of government import requirements
that cannot be effectively handled from the point of origin at this time. If that service is not meeting an importer/exporter's
needs then one should change broker and or forwarder. In Nuevo Laredo alone, there are over 457 licensed Mexican customs brokers.
Brokerage and Forwarding Costs
Like any service provider, brokers and forwarders are going to charge for
their services. Many exporters and importers believe that Mexican Custom brokerage fees are excessive and hard to accept because
they do not add any value to the merchandise being shipped. The actual cost of crossing a shipment into Mexico is dependent
upon a number of factors. To have more control over border crossing fees, exporters can negotiate sales terms that would include
paying for forwarding costs which would allow the exporter to choose the forwarder. Furthermore, by understanding the forwarding
process the exporter will be in a better position to negotiate lower forwarder fees. It is more difficult for exporters to
influence brokerage fees because brokers work for the importer. However, remember that same importer could use high brokerage
fees to try and negotiate a lower product price. By working together, exporter/importer can obtain the best forwarder/brokerage
services at the best brokerage fees.
Several years ago Mexican Customs deregulated custom broker fees allowing
for open competition. However, old traditions die hard. Most brokers currently base their commission on the old government
maximum percentage rate of .45 percent of commercial export value plus disbursements. U.S. forwarding Agents, charge a flat
rate ($350.00 U.S. Dollars aprox. per full load), if the volume is significant and guaranteed. Obtaining actual documented
charges for broker and forwarder services is very difficult because this information is considered confidential. However,
through discussions with brokers, forwarders and using import documents obtained from importers, a general picture of the
cost structure can be developed. Total border crossing cost for a commercial shipment is divided into three categories: 1.
Disbursements, 2.Accessorial Charges and 3. Broker's Commission.
Disbursements are out-of-pocket expenses with an invoice to support the charges.
These charges are associated with preparing the shipment to cross into Mexico and physically placing it at Mexican Customs.
They include all forwarding charges, AAA “ pedimento” processing fee, import duties and sales taxes if applicable.
Forwarding costs include many services such as classifying the product, unloading and reloading trucks, warehouse storage
if necessary, preparing the Mexican Customs import document (pedimento), drayage movements and SAGARPA inspections. Accessorial
Charges are costs incurred by the Mexican broker in getting the shipment through Mexican Customs and are in addition to the
broker's commission. This fee is based on general charges such as phone, fax, messenger services, document processing fees
and red light inspections. A Broker's Commission is the fee charged to execute the import paper work and is calculated as
a percentage of total commercial export value plus disbursements or as a flat rate per full load. Again, the actual cost of
a given shipment will depend on the forwarder/broker used and the product being imported.
What Exporters should do?
The first and most important factor in doing business on the border is communication.
Before closing a sale make sure that brokers and forwarding fees where discussed. Request the name and contact person for
both broker and forwarder. If shipping for the first time or shipping a new product, request that the importer use a broker
that has experience in crossing the product to be shipped. Before shipping, make sure that the shipment complies with all
import requirements. For products coming from Canada, contact the Border Clearance Representative based at the Nuevo Laredo
border area. For most agricultural and food products, these requirements are on the “Hoja De Requisitos” issued
by SAGARPA (“import requirement sheet”). The importer or broker can send you a copy. To reduce costs and delays
at the border, exporters may consider doing the following. :
1. Consolidate all possible shipper's invoices on one conveyance and into
one commercial invoice to avoid multiple Mexican Customs entries.
2. Provide a column on the invoice for the Mexican Harmonized Tariff Schedule
(HTS) for Mexican Customs classification when possible and summarize same by HTS in order to calculate duties, if applicable
and prepare Pedimento easier. Remember, Mexican HTS codes are not exactly the same as Canadian/ U.S. HTS codes. By providing
the correct HTS code, the forwarder's classification time will be reduced.
3. Provide another column for shipments of multiple items, to mark country
of origin and NAFTA qualified products.
4. Palletize all shipments to reduce transfer costs and handling damage.
5. Arrange for trailers to travel through the border to final destination.
This will eliminate
product transfer costs from one trailer to another. However, check on how
much the bond for insuring the trailer to travel into Mexico will cost to see if this is cost effective.
6. Assure 100 percent compliance 100 percent of the time. Once a relationship
has been established with the broker/forwarder and a history of no non-compliance errors has been recorded, the time to classify
a shipment will be greatly reduced and so should the cost over the long run.
7. First time shippers should consider using a U.S. broker that provides
services for southbound shipments. It will increase the crossing cost, but should significantly reduce ones learning curve.
It will also guarantee that there is someone looking out for the exporter's interests here on the border.
8. Visit the border. Meet the brokers and forwarders and walk through the
Mexican import clearance process. The Office of the Canada Border Clearance Representative based at the Nuevo Laredo border
area will be of your help.
9. Arrange for shipments to arrive at the border in the morning, as early
as the forwarder will accept them. While bridges and Customs are open until 12:00 PM, SAGARPA is open only from 11:00 AM to
7:00 PM.
Conclusions:
This report was written to give Canadian and U.S. exporters an insight into
the U.S./Mexican border crossing process for household goods, agricultural, fish and forestry products exports to Mexico.
There are a number of factors that contribute to the rate of shipments crossing through the border. Given changing Mexican
government import requirements, broker and forwarder procedures and limited infrastructure, there will always be a need to
stop shipments at the U.S./Mexican border. In the long run, fundamental changes in Mexican and U.S. government laws and policies
and broker/forwarder procedures will need to occur to have a lasting impact on improving trade movement between the United
States and Mexico. In the meantime, Canadian and U.S. exporters need to better understand the border crossing process to be
able to make more informed decisions on how to export to Mexico. There are a number of factors in the border crossing process
that are beyond the direct control of exporters. Nevertheless, those exporters that invest the time to understand the crossing
process, and take control of those factors that they can control, will have a significant advantage over those exporters destined
to conduct business as usual leaving them little recourse but to complain about the problems in doing business in Mexico.
