Freight Costs Still A Concern At U.S.-Mexico Border

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Wait times for trucks importing and exporting cargo across the U.S.-Mexico border have dropped considerably from April crisis levels but industry experts warn threats to the supply chain haven’t been eliminated.

“I’ve been telling my members that maybe this is a blessing in disguise,” said Bob Costello, Chief Economist and Vice President of International Trade Policy for the American Trucking Associations (ATA).

Costello, speaking at the annual Global Supply Chain summit hosted by the U.S. Chamber of Commerce on May 16, was referring to the backups and delays that ensued at the southern border after President Trump in late Marchthreatened to shut it down in response to immigration issues. The problem was exacerbated when federal cargo inspectors were redeployed from cargo entry ports to help deal with the migration problem.

“[Wait] times have proved significantly, but we now have another reminder of how critical this trade is, and the modes of transportation that have to move it. Sometimes we need those reminders…that if you shut down the border for a week, you’re in a recession, I can almost promise you that.”

Costello emphasized the importance trade on the southern border is to American trucking and the U.S. economy: 32,000 U.S. truck drivers participate in cross-border freight moves, representing roughly $1.1 billion worth of cargo per day.

The U.S. automotive sector feels delays and border closure threats particularly hard. Shutting down a single assembly line for an hour due to a lack of parts can cost an automaker $1.3 million per day, said Kristin Dziczek, Vice President of Industry, Labor, and Economics for the Center for Automotive Research, who participated on the panel. “You can’t make a car without the parts, and some very critical parts are supplied by Mexico and countries south of Mexico. We were predicting the whole [automotive] industry would be down within a week if the southern border is closed.”

U.S. Congressman Henry Cuellar (D-Texas), who moderated the cross-border discussion, explained that he had asked the U.S. Secretary of Homeland Security in April to transfer inspectors from the U.S.-Canadian border to his district in Laredo – which handles roughly half of the U.S.-Mexican cross-border cargo – due to delays resulting from the initial transfer of Customs and Border Protection (CBP) officers to the migrant problem.

“Fifteen percent of Laredo’s inspection capacity went away, which caused hours and hours of delays,” Cuellar said. “They took 300 agents from Laredo, but have since returned 165, which has brought cargo movement pretty much back to normal – almost, we’re still not there.”

When asked about the potential effects of prolonged uncertainty at the border, Costello said freight supply chains have gotten so much more efficient over the years that inventory carrying costs are “way down,” which in turn frees up money for things like hiring employees and expanding.

However, “if this becomes the new normal, I think you’ll see that inventory carry costs will go back up, because you’ll then have to put more cushion in your supply chain, which takes money away from doing other things. That’s my concern.”

To help alleviate those concerns, Costello said the ATA was working with Cuellar and Congress to revamp Customs Trade Partnership Against Terrorism, a voluntary program overseen by CBP which, among other things, is supposed to speed freight through the border.

“We need to reauthorize the program, but also put some real concrete benefits in it for the trucking industry,” Costello said.

Image sourced from Pixabay