Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: Cargo insurance can boost cross-border operators’ business; Ryder System leases logistics center near Dallas–Fort Worth; Paccar Inc. announces $50M investment in Mexico truck factory; and thefts from cargo trains in Mexico rose in September.
Cargo insurance can boost cross-border operators’ business
Despite the prevalence of cargo theft and trucking accidents in Mexico, cross-border business remains a lucrative market for brokers, carriers and shippers.
An increased focus on bringing supply chains back to North America helped Mexico replace China as the top U.S. trading partner in 2023. Mexico has been the top U.S. trading partner since the beginning of the year, reporting $656 billion in two-way trade from January through November, according to the U.S. Census Bureau.
Even with almost 70% of the trade between Mexico and the U.S. taking place through trucking, the market for cross-border cargo insurance can be confusing for many, according to Mark Vickers, executive vice president and head of international logistics at Reliance Partners.
Vickers said large carriers dedicate a significant amount of their capacity to shipper-specific cross-border contracts.
“They win these contracts due to a number of factors, but paramount is their linehaul rate, cross-border risk management strategy and insurance, and volume of asset allocation,” Vickers said.
Cross-border shippers often prefer to work with a carrier that can provide them 100 trucks a week as opposed to smaller carriers, according to Vickers.
“These large carriers are then able to get preferential terms on their Mexican cargo insurance because of the volume they are moving, and because of the static nature of their risk management,” Vickers said. “This makes it difficult for a small to medium-sized broker or carrier to compete against the big dogs. Cargo insurance rates in Mexico will be much better for a large carrier that has standardization in their risk management than for a broker that is attempting to move a single spot shipment or for a carrier that is moving a lower volume. However, we are seeing brokerages and smaller carriers get awarded business when they are proactively offering Mexican cargo insurance and are spotlighting their risk management protocols if their rates are in line.”
Chattanooga, Tennessee-based Reliance Partners is a trucking insurance provider with nine locations nationwide. Vickers joined Reliance Partners in 2021 after the company acquired Borderless Coverage, which he founded in 2018.
He started Borderless Coverage because many large shippers were asking for an all-risk cargo insurance solution in Mexico.
“I was at Total Quality Logistics for almost eight years before I started Borderless Coverage, and during my time there I was handling a lot of expedited inbound and outbound shipments from Laredo, Texas,” Vickers said. “All of these shippers in this industry, they’re using me for brokerage services domestically and then they started to say, ‘Hey, you’re doing a great job handling all of our expedited shipments. Can you also start handling our Mexican business?’”
Liability insurance is not required in Mexico. However, when the shipper does not declare the value of the merchandise, the liability is limited to $90.52. Given the extremely low limit, pursuit of liability actions is uncommon in Mexico, Vickers said.
“What I needed as a freight broker and what my shippers were asking for 10 to 12 years ago was a product they could layer on top of their global policy and/or self-insurance program (that typically carries a deductible of $100,000), which covers theft and has a deductible of $5,000 or less,” Vickers said. “Borderless Coverage does just that and forces shippers, brokers and carriers to work together better in a siloed cross-border supply chain.”
With more global manufacturers moving parts or all of their supply chains to Mexico, Vickers said small and medium-size brokers and carriers need to understand all the insurance options they have for loads moving through the country.
“Cargo insurance in Mexico is now much more accessible, more cost-effective, and now being requested by over 30% of U.S. based cross-border shippers,” he said. “It’s more cost-effective because logistics firms are using it at over 500% more than it was being used prior to the pandemic, prior to the implementation of the United States-Mexico-Canada Agreement (trade pact) and the ongoing U.S.-China trade war, which accounts for much of the reasons behind the supply chain congestion that has resulted in nearshoring to Mexico.”
As more cross-border freight moves between the two countries, cargo theft continues to be an issue in Mexico. Reliance Partners has launched its Mexico Cargo Hijacking Data Portal, where shippers, carriers and brokers can see some of the latest trends across Mexico.
There were 6,030 incidents of cargo theft across Mexico between January and September 2023, an 8% year-over-year increase from the same period in 2022, according to Reliance Partners.
In November, Mexico’s National Association of Vehicle Tracking and Protection Companies recorded 306 cargo theft cases across the country, averaging more than 10 a day.
In August, the Mexican Alliance of Carrier Organizations threatened to go on strike if federal and state authorities did not implement more protective measures across roadways, which they agreed to before the work stoppage took place.
Vickers said federal and state authorities in Mexico still need to do more.
“The government needs to get more involved; that’s why there was almost a very large strike in Mexico from drivers because of the violent hijackings, and the government wasn’t doing anything at all to help that,” he said. “They need to take a more aggressive stance on cargo theft.”
Ryder System leases logistics center near Dallas-Fort Worth
Ryder System Inc. has leased a 234,475-square-foot industrial space in Haltom City, Texas.
The space is in the recently constructed Northmark Commerce Center, a Class A facility that includes 32-foot clearance heights, single- and multi-tenant functionalities, cross-dock configurations, 56 dock doors, 132 parking spaces, 19 off-dock trailer stalls, and a secured drop lot with 104 additional trailer stalls.
Miami-based Ryder (NYSE: R) is a leasing, fleet management, transportation and supply chain solutions provider.
Haltom City is between Dallas and Fort Worth and in close proximity to AllianceTexas, a 27,000-acre, master-planned industrial, mixed-use and residential development.
The Northmark Commerce Center was also recently sold to an institutional buyer, according to the Newmark Group, which handled the sale. Details of the buyer and transaction were not disclosed.
“With its prime last-mile location in the coveted North Fort Worth industrial submarket, Northmark presented an exceptional investment opportunity,” Newmark Vice Chairman Dustin Volz said in a news release.
Paccar Inc. announces $50M investment in Mexico truck factory
Paccar Inc. is investing $50 million at its Kenworth Mexicana truck manufacturing facility in Mexicali, Mexico, according to a news release.
The investment will be allocated to a new testing facility for electric, diesel and natural gas vehicle engines, as well as additional administrative offices, and expansion and remodeling of the facility’s cafeteria. The plant employs 3,500 workers.
Paccar (Nasdaq: PCAR) produces Class 5 through Class 8 Kenworth and Peterbilt trucks at the 590,000-square-foot Kenworth Mexicana plant. In 2022, the plant produced 15,500 vehicles that were exported mainly to the U.S. and Canada.
Mexicali is in northern Mexico, directly across the U.S.-Mexico border from Calexico, California.
Thefts from cargo trains in Mexico rose in September
There were 312 theft events from cargo trains in Mexico in September, according to the latest monthly data from Mexico’s Railway Transport Regulatory Agency (ARTF).
Cargo train thefts were up 108% year over year in September compared to the same month in 2022, when 150 incidents were recorded.
Agricultural grains accounted for 21% of the thefts during the month, followed by industrial and raw materials at 17% and auto parts at 16%.
ARTF did not provide details on which Mexican states recorded the most cargo train thefts.
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