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Mexican Customs

Brokers Association

Understanding U.S./Mexico Border Crossing Regulations

Aduana

Mexican Customs

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.

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