Live from the Future of Supply Chain in Atlanta Mark Vickers, executive vice president and head of international logistics at Reliance Partners comes on FWNOW to break down the intricacies of cross border insurance and cargo liability in Mexico.
When it comes to cargo insurance in Mexico, it’s commonly referred to as the “Wild West,” as there isn’t any standardization like there is in the U.S. and Canada. The Federal Motor Carrier Safety Administration in the U.S. has specific requirements for carriers. Most motor carriers for trucking companies are required to have $750,000 of auto liability insurance.
In Mexico, it’s a wildly different story. Vickers breaks it down, “There are very few insurance markets that will do Mexico because carriers in Mexico don’t have any carrier insurance. In the U.S. carriers have $100,000 of cargo insurance, in Canada it’s very similar.
“In Mexico the law is different. Carriers are only liable for 14 cents per pound. They’re responsible for under $4,000 regardless of value. The load could be worth $1-$2 million or $25,000 but the carrier is only on the hook for the weight of the load.”
Cross-border freight has traditionally been a complicated process. Securing insurance can become expensive, as games of phone tag among the shipper, Mexican carriers and insurance agents drive up margins as more parties become involved. Educating shippers about the differing insurance regulations could yield substantial savings for companies engaged in international trade with Mexico.
The industry standard for freight brokers on cargo liability in Mexico has always been that brokers will handle the freight but shippers must sign a waiver of liability in Mexico. Essentially, the freight will be moved but they aren’t responsible for it at all once it crosses the border. Not an ideal situation for shippers to be in.
Reliance has developed a Borderless Coverage solution. Vickers explains, “The product we have is a shipper’s interest cargo insurance product. We pay the shipper directly for the full value then attempt to seek reimbursement after that.”
The traditional path a shipment takes involves a U.S. carrier then a U.S. inspection warehouse. From there the shipment is taken by a drayage carrier across the border where it goes through another inspection warehouse. Finally, a Mexican carrier picks it up and delivers it to the final destination.
In the past, any claim that would have happened after four to seven companies touched it would be caught up in disputes for months or even years. Gone are those days under the Borderless Coverage. Now, in the event of a claim, Reliance covers that shipper for the full value regardless of where it happens.
As for those looking to take advantage of this new offering. Vickers suggests, “Don’t build the program till you have the business. Find one client that is doing cross border freight that you’re killing it with on the U.S. side and ask hey can you help us with Mexico. Listen to all their specific requirements, give us a call and we’ll help you win that business.”
With Mexico being the top trading partner with the U.S. every month this year and for a majority of last year not having a cross border solution is no longer an option.
Vickers final thoughts were, “If you’re not already responding to client requests of, ‘Can you handle our Mexican freight?’ you’re way behind the curve.”