How should the US-Mexico cross-border trucking dispute be resolved

Under NAFTA, the US was to give Mexican commercial vehicles full access to four US border states immediately, followed by access to all of the continental US in 2000.

The intent of the historic agreement was to eliminate trade barriers and streamline cross-border movement of goods and services among the three North American countries. However, the US-Mexico cross-border trucking dispute between the two countries has been a source of contention ever since. The arrangement, as defined by the NAFTA, has yet to be implemented. Under pressure from organized labor, environmentalists,and prominent Democratic legislators, the United States has refused to implement NAFTA's trucking provisions for the last twenty years, claiming that Mexico's truckers work longer hours, experience more fatigue, drive older and less roadworthy trucks, and may pose a threat to national security or aid in smuggling immigrants and drugs.

The Mexican government, of course, objects to the aforementioned impediments to implementation, and contends that the US-Mexico cross-border trucking dispute constitutes a violation of US commitments under NAFTA. Canada has acted as mediator in the complaint, and in 2001, the board of arbitration determined unanimously that the US was in breach of its obligations under the NAFTA. However, Mexico did not retaliate at that time, nor did the US alter the status quo.

During several years of inaction, Mexican trucks were limited to a 25-mile commercial zone in US border states, while US trucks were similarly limited in Mexico. Finally, in 2007, the US launched the Cross Border Demonstration Project, an initial pilot trucking program that granted only a small number of Mexican trucks and truckers access to the heartland, only after being subjected to rigorous testing and certification. The program was intended to last only one year, but President George Bush kept it in place for two additional years after Congress attempted to defund it.

Upon entering office, President Obama and a Democratic-led Congress pulled the plug in 2009. Mexico quickly retaliated with $2.4 billion in tariffs on 90 manufactured and agricultural export goods.

The pilot program's suspension resulted in a historic lawsuit filed in 2009 under NAFTA by the National Cargo Transportation Association (CANACAR) - a private Mexican trade group that represents 4,500 trucking companies. The suit sought $6 billion in compensation for losses allegedly suffered since the first restrictions were imposed on Mexican carriers during the twenty year US-Mexico cross-border trucking dispute.

The Obama administration responded to calls for a new pilot like the Demonstration Project of the Bush years by implementing an "initial concept" program in 2011. The program has only involved about 13 carriers, however, and most of the activity comes from two large carriers, demonstrating how difficult it is for the Mexican trucking industry as a whole to get on board with such an unstable step in the right direction. With the pilot program set to expire later this year, and no serious talk of fully complying withNAFTArequirements for cross-border trucking access, CANACAR is preparing to reinstate their 2009 complaint before a NAFTA panel - only this time, the amount in damages that will be claimed is said to be up to $30billion.

More Than 20 Years Later, Cross-Border Trucking Fight Under NAFTA Continues

Holland & Knight Transportation Blog

Major industry groups are lobbying the U.S. Trade Representative with respect to existing program that allows Mexican trucks to operate in the U.S under NAFTA. It is unclear what the cost to the U.S. would be if it were to cease allowing such operations.

As NAFTA negotiations continue, the American Trucking Associations (ATA)-the trucking industry's largest trade group-is advocating to keep in place a controversial program that allows Mexican trucks to operate in the U.S. by transporting international cargo to and from Mexico. The trade group wrote a letter to U.S. Trade Representative Robert Lighthizer arguing that such operations reduce border congestion. This is because the regulation allows Mexican carriers that drop off a load in the U.S. to pick up a load for the return to Mexico rather than returning empty. Trucks are inspected at the border whether empty or loaded, so it is more efficient to return loaded trucks, the ATA argues. Furthermore, the use of additional equipment and handling adds cost, increases the likelihood of delay and the potential for damage.

The Owner-Operator Independent Drivers Association (OOIDA)-the largest trade association representing small-business truckers and professional truck drivers -- in conjunction with the International Brotherhood of Teamsters-a labor union that represents truckers in the U.S. and Canada-also wrote a letter to the U.S. Trade Representative arguing that Mexican trucking companies are taking away jobs and profits from American drivers and motor carriers, while endangering the public. They argued further than there is little incentive for U.S. carriers to operate in Mexico, and that Mexican trucks have been a conveyance for contraband and undocumented immigrants.

Mexican-domiciled carriers may operate in the U.S. today if approved by the Federal Motor Carrier Safety Administration (FMCSA). This right arose from the first negotiation of NAFTA and has been hard-fought, as the following timeline demonstrates:

• 1994 -NAFTA goes into effect, which included a phase-out of restrictions on cross-border carriage, first to border states and then the rest of the U.S.
• 1995 - U.S. refuses to lift restrictions on Mexican trucks.
• 2001 - NAFTA dispute settlement panel finds U.S. to be in violation of its NAFTA obligations.
• 2002 - The FMCSA implements an interim final rule allowing cross border operation.
• 2004 - the U.S. Court of Appeals for the Ninth Circuit sets aside the FMCSA rule, then the United States Supreme Court reverses the Ninth Circuit.See Dept. of Transp. v. Public Citizen, 541 U.S. 752 (2004).
• 2007 - Congress requires that a pilot program be implemented before Mexico-domiciled carriers are permitted to conduct long-haul operations in the U.S.SeeSection 6901 of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007. A small pilot program allowing cross border carriage begins.
• 2009- U.S. removes funding for the pilot program and Mexico implements retaliatory duties on more than $2 billion worth of U.S. goods.
• 2011 - another pilot program begins, and Mexico lifts its retaliatory duties.
• 2015 -following the end of the pilot program and a report to Congress, the FMCSA begins accepting and processing applications for long-haul operating authority from Mexico-domiciled carriers.

Despite the arguments from both sides, and the effort exerted in allowing such operation, relatively few Mexican-domiciled carriers are currently operating in the U.S. -The FMCSA website lists 35 Mexico domiciled motor carriers as authorized to operate long-haul (Mexico-Domiciled Motor Carriers Authorized to Operate Long-Haul under OP-1MX Authority). Clearly, the ATA would like the possibility to see such operations expanded in the future, while OOIDA and the Teamsters are continuing the multi-decade fight to prohibit Mexican carriers from operating in the U.S. Some argue that excessive control reviews on behalf of U.S. authorities have become a deterrent for additional and existing Mexican participants. The U.S. Trade Representative is declining to comment at this time as to whether it intends to renegotiate this portion of NAFTA.

Whether or not the U.S. should stop allowing Mexican-domiciled carriers to operate in the U.S. should not be analyzed in a vacuum. If the U.S. does seek to end such operations, a countervailing response from Mexico will be expected. Since Mexico and the U.S. have not exchange any formal conclusion of the NAFTA dispute, Mexico could reinstate retaliatory duties at any time, even before any renegotiation of NAFTA is complete. Only at that point can the costs and benefits of such an action be evaluated.