FMCSA has had authority to run pilot programs of not more than three years to evaluate alternative regulations or innovative approaches to safety. An appropriations bill passed in December 2009 removed restrictions on using funds for a pilot program and FMCSA began considering one. According to the Federal Register notice, the purpose of the pilot program is to collect and evaluate data on the safety performance of Mexico-domiciled carriers. Safety performance would be measured primarily in terms of violations assessed at the roadside, as a result of inspections conducted at traditional weigh stations, ports of entry, or during traffic enforcement activities. If Mexico-domiciled carriers are as safe as the average for U.S. carriers, FMCSA would likely use the same application process for a post-pilot program for Mexico-domiciled carriers seeking long-haul authority.
Some critics of the pilot program argue that it is the beginning point of full implementation of the NAFTA trucking provisions. That is a logical conclusion. The pilot program and the previous September 2007 “demonstration” program that ended when funding was cut off in March 2009 were in response to concerns in the U.S. that Mexican trucks are not as safe as U.S. trucks and endanger U.S. citizens. The Office of Inspector General of the Department of Transportation is to issue a report to Congress six months after the pilot program begins and again after it ends. If Mexican trucks are as safe as U.S. trucks, there is no reason under NAFTA to not implement a permanent cross-border trucking program from locations in Mexico to locations in the U.S. Mexican trucks would not be allowed to transport goods from one point in the U.S. to another point in the U.S.
Trucks and drivers from Mexico would be required to comply with all U.S. regulations that apply to U.S. trucks and drivers. All carriers and drivers would submit information for a Department of Homeland Security screening process. Mexican carriers would go through a three stage, 18 months process to move from provisional operating authority to a permanent one. The carrier would maintain that permanent authority as long as all FMCSA regulations are met. FMCSA would be notified when additional drivers and trucks are added by a carrier and they would meet the same requirements. U.S. liability insurance would be required and truck engines would need to conform to U.S. EPA regulations applicable to 1998 or later engines. FMCSA would equip each truck with an electronic monitoring device such as a GPS and/or electronic on board recording device.
The strongest supporters of the trucking plan are producers of the 99 products value at $2.4 billion that have tariffs of 5-25 percent first imposed by Mexico in March 2009. The International Dairy Food Association had an $837 million market in Mexico last year, but cheeses with tariffs have seen exports fall by 60 percent through February after being added to the list in August of 2010. Some U.S. pork products were added to the list at that time. According to the National Pork Producers Council, the tariff rate on ham and shoulder cuts is now 5%, and almost half of the U.S. pork shipped to Mexico is fresh, unprocessed ham. U.S. pork exports to Mexico from August to December 2010 were down 9 percent from 2009, while Canadian exports grew by 99 percent. Western Growers, representing fruit and vegetable growers in California and Arizona, estimate exports of fruit, vegetable and tree nut commodities to Mexico have declined over $200 million. The Mexican government’s actions on tariffs have gotten the attention of the affected industries and Senator and Representatives from areas where those products are important.
The Mexican government has also been wise to agree to reduce the tariffs by 50 percent when a trucking agreement is signed and eliminate the other 50 percent when the first truck is approved to operate under the pilot program. Mexican consumers are hurt by these higher tariffs and the government has an interest in seeing the tariffs end sooner rather than later. Also, U.S. producers do not have to wait three years to get relief from the tariffs.
The comments received to date by FMCSA on the proposed pilot program displayed on www.regulations.gov have been overwhelming negative with most of the entries orchestrated by the Teamsters Union. Positive comments have come from the affected industries and a few individuals.
The current process of hauling goods to the border, offloading and reloading onto trucks from the other country wastes time, money and labor. Businesses and workers on both sides of the international border lose money. The selling firm’s price after transportation costs is reduced by the inefficient transportation. The selling firm must accept the lower return or attempt to negotiate a higher selling price which reduces the benefits of trade for the buyer. Everybody loses including drivers represented by the Teamsters’ Union as the U.S. economy grows a little slower and supply chains seek partners in countries other than Mexico.
Violence problems in Mexico have certainly complicated relations on regulatory issues. The FMCSA appears to have worked hard to ensure that Mexican trucks and drivers meet U.S. standards. This will be a key test of the Mexican government’s ability to work with the U.S. government to run an effective program.
The comment period ends roughly four months after the Department of Transportation released an “initial concept document.” Another 60 days will be needed to assess the comments and publish a final Federal Register notice. After the pilot program is implemented, the Obama Administration, the U.S. Congress and the Mexican government need to find a way to resolve trade regulatory issues before they become mired in U.S. politics.