Growth of cross-border freight brings concerns on capacity, driver shortage

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Looking at data from the Bureau of Transportation statistics, northbound crossings from Mexico into the U.S., and southbound from Canada to the U.S. presents an interesting contrast.

Jason Miller, interim chairperson and professor of supply chain management at the Eli Broad College of Business at Michigan State University, pointed out, “We see an influx from Mexico to the USA (Q1 2024 up 16% from Q1 2019), whereas southbound border crossings are down 1.4% in Q1 2024 from Q1 2019.” 

Miller theorizes that the drop in southbound crossings could be due to slower housing starts, especially in the northern U.S., and likely reduced demand for Canadian lumber. He also said, “The shifting of the center of gravity of motor vehicle production towards the southern USA makes Canadian auto parts imports less attractive due to longer transportation distances. Also, the continued competition from China likely caused some importers to shift from Canadian sourcing to buying from China.”

The increase of northbound crossing aligns with increased manufacturing activity in Mexico.  

Mike Burkhart, vice president for Mexico at C.H. Robinson, said that over the company’s 30 years of operating in Mexico, the company has seen it gradually become a magnet for manufacturing activities, with the pandemic boosting its transition to a nearshoring boom. “We expect this trend to play out more fully over the next five years,” he said.  

[Related: Cross-border freight on the rise at both borders]

Constrain on capacity

As Mexico continues to capitalize on the benefits of nearshoring, and as more manufacturing facilities are developed, there’s concern of capacity tightening in the region.

Logistics teams must have plans in place to navigate future volatility, said Carlos Godinez, vice president of new business development and marketing at Uber Freight. “Shippers should prioritize forming long-term commitments with carriers to ensure capacity during high demand periods, work in their productivity projects to become more attractive shippers, consider other modes like intermodal and ocean, and leverage alternative gateways.”

As shippers plan for anticipated growth, Ed Habe, vice president of Mexico Sales at Averitt, noted that they should be looking at alternative solutions such as intermodal and ocean transportation. “Diversifying your supply chain model across the different transportation modes will be critical to your success moving freight to and from Mexico in the coming years," he said. 

Godinez and Habe agreed that a driver shortage on both sides of the border is a factor to keep in mind. “With 56,000 unfilled driver positions — a 9% year-over-year increase — employment continues to be one of the biggest problems in this region,” Godinez said.

U.S. and Mexican carriers need to find a happy medium when it comes to driver utilization, Habe said. “B-1 visa drivers leaving Mexico carriers to drive for cross-border carriers in the U.S. are creating driver shortages and raising costs through rising driver wages," he said. 

Godinez also added that cargo theft is another significant challenge for cross-border shippers and carriers, emphasizing on the importance of real-time shipment tracking technology. During the first two months of this year, Mexico reported 1,381 theft incidents. Members of the Mexican Alliance of Carrier Organizations (AMOTAC) responded by holding a national strike on the central federal highways.

[Related: Surge of cargo theft is 'hitting us like lightning,' experts say]

There isn’t infrastructure in Mexico to support the growth needed on the carrier side too, said Ross Spanier, chief revenue officer at R&R Family of Companies. “U.S. trucks are not as bullish on getting into Mexico without some increased level of security, so we are very dependent on Mexico carriers growing to support the trade growth.”

Another effect is the change on freight rates for the Mexican portion.

“The companies establishing operations in Mexico want to secure the transportation services, offering to pay higher rates driving the market to a more expensive situation," said Francisco Tijerina, director of Mexico division at Logistics Plus.

With the influx of freight, Mexico dealt with increases in driver salaries, insurance premiums, tolls and fuel, in addition to a difficult exchange rate between the dollar and the peso, similar to U.S. carriers. However, "the volume of freight coming from Mexico has been a bright spot in an otherwise prolonged downcycle in the U.S. market," Burkhart pointed out.

The road ahead

As opportunities for cross-border freight arise, Burkhart said it’s crucial to consider the freight broker you’re working with. Look for a broker with experience in managing cross-border freight and one that has well-established relationships in Mexico, as well as has bilingual experts at multiple crossings. On the U.S. side, it’s also worth working with a broker who has the fastest cross-docks and ample parking.

The relationship between U.S. and Mexican carriers is vital, Tijerina added.

“Years ago, there were more companies with well-established partnerships, assuring a flawless door-to-door service. This changed in the last decade as U.S. carriers decided to change their focus and less equipment was sent into Mexico," he said. "This forced the market to allow the transloading option at the border from the U.S. trailers to Mexican ones. Customers are now looking for that true service, making things more complicated for the carriers. New partnerships must be negotiated, and more equipment will have to be added to these lanes.” 

Pamella De Leon is a senior editor of Commercial Carrier Journal. An avid reader and travel enthusiast, she likes hiking, running, and is always on the look out for a good cup of chai. Reach her at [email protected]