Have you thought about moving some or all of your overseas operations to Mexico? In 2019, increasing trade tensions between the United States and China had many American companies rethinking their international supply chains and manufacturing locations. The United States-Mexico-Canada Agreement (USMCA) was signed into law in early 2020 and the switch to cross-border operations with Mexico accelerated. When COVID-19 struck, cross-border operations with Mexico became even more attractive—in some cases, even imperative. Over the last two years, many companies have moved their supply chains from other parts of the globe to Mexico and other areas of Latin America. Momentum Transportation, a Landstar Agent, has the expertise to help you understand the benefits to moving your supply chain operations to Mexico.
Benefit #1: Transportation costs and time-savings
Importing from China and other overseas countries requires shipping via ocean or air—the former takes weeks and the latter is cost-prohibitive. In contrast, goods can be quickly imported from Mexico using ground transport in a matter of days—or even hours. The current situation at U.S. ports—limited dray options, slow port operations, and a backlog of vessels parked offshore—can delay a supply chain by six months or even more.
At Momentum Transportation, we see customers are looking for shorter, faster and more resilient supplier transportation lanes. In addition, many customers are adding additional key component suppliers in a variety of geographic regions to further insulate their products from unexpected supplier disruptions.
Benefit #2: Labor market and costs
In addition to the cost and risk of overseas transportation, labor is also playing a part in the move to Mexico-based supply chains. Mexico has not seen the same level of impact to the job market as the US during COVID, so production has not been as greatly impacted. There is significant manufacturing and logistics expertise and infrastructure already in place in Mexico.
Linked to the availability of labor, the cost of labor in Asia continues to increase. Where low costs of manufacturing used to offset the costs of shipping, that no longer holds true. Now, the combination of escalating labor costs along with the higher cost of power and infrastructure in China are also making Mexico a more cost effective choice.
Benefit #3: Protection for Intellectual Property
Often U.S.-based companies are dismayed to find their product designs replicated without authorization in China—and little recourse to halt it. Intellectual property laws in Mexico are much stronger, which means that they have much greater assurance that their products will not be replicated. What’s more, in the rare cases this happens, there is legal recourse.
Benefit #4: Convenience of language and time
Spanish is the second-most common language in the United States, while a large proportion of Mexican citizens also speak English. So whether you are hiring bilingual employees to work with your Mexican partners—or are looking for Mexican partners with English-speaking staff, there are far fewer barriers to communication.
Another way communication is much easier is that Mexico is located in our same time zones, making it far simpler and convenient to keep the lines of communication open. No more trying to connect with someone on the other side of the world who has limited availability during your normal work day. Fewer language barriers and closer proximity as far as location and time means that it is much simpler to conduct onsite inspections, manage operations, and build long-term trusted relationships with vendors.
Benefit #5: “Trusted partner” status for customs
The United States has two special programs through the U.S. Customs and Border Protection agency that facilitate faster and easier customs processing for trade between the United States and Mexico (FAST and C-TPAT). Free and Secure Trade (FAST) is a trusted traveler/trusted shipper program that allows expedited processing for commercial carriers who have completed background checks and fulfill certain eligibility requirements (much like TSA Precheck for air travelers). While FAST certification is for drivers, Customs Trade Partnership Against Terrorism (C-TPAT) is a broader program that shippers must apply for. Once a company is certified for C-TPAT, its drivers can apply for FAST. While certification for these programs isn’t for everyone, it can be a major advantage for those that choose to participate.
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Cross Border Facility Spotlight: Landstar in Laredo, TX
As an independent agent of Landstar, Momentum Transportation leverages a 31,000-square-foot logistics facility strategically located for cross border operations in Laredo, TX. The cross border facility is located on a 50-acre site that accommodates 450 trailers with room for future expansion. For exclusive use by Landstar and its agents, The Landstar U.S./Mexico Logistics Service Center is highly secure with 24/7 guards, inspectors and video surveillance, and is a C-TPAT certified site. It also has a 30-bay cross-dock and transload facility, along with a dedicated platform and Heavy/Specialized freight area with a custom 120-ton, stand-alone bridge crane.
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What to look for in a partner for Mexico Cross Border Operations
When a company moves production and manufacturing to Mexico, there is a whole different set of requirements and operational expertise required to transport those goods to U.S. markets. Momentum Transportation has deep experience in this area. “Before you get started, a good cross border partner will make sure that expectations of all parties involved are in place—the shipper, receiver, customs broker and carriers. Clarity, attention to detail, and organization are critical at every stage,” says Becky Scott, Director of Key Accounts at Momentum Transportation. Here’s a checklist of some of the most important considerations:
- Ensure your documentation is properly organized. That includes commercial invoices, packing lists, shipper’s export declaration, bill of lading, and who is handling the customs clearance.
- Define whether transloading is allowed. You should set parameters around transloading in advance. If allowed, have protocols in place to prevent loss of cargo or requirements for special handling. If transloading is not approved, keep in mind that not all U.S. drivers can move freight into Mexico and vice versa.
- Plan for communication and tracking. For instance, does the consignee require Spanish speakers? Are special routes or security measures necessary in Mexico? Is it a targeted commodity that requires safe havens at night?
- Have security protocols and insurance in place. Your logistics partner should have an in-depth understanding of Mexico cargo insurance, as well as a detailed list of security protocols on both sides of the border, so you can be assured your cargo is protected while in transit.
- Understand technology limitations. Lastly, drivers in Mexico do not have access to the same technology as in the United States. For instancer, drivers may not be able to take photos or send texts when loading or unloading. It’s important to understand what’s possible—and what is not— so you have realistic expectations.
- Investigate equipment availability in advance. Platform equipment options in Mexico can be very different from those available in the United States. For example, perimeter trailers are very hard to come by in Mexico, so equipment substitutions may need to be made.
- Establish who is the owner of the freight and responsible for customs. Perhaps even more than in the United States, Mexico runs on relationships. Many companies find that Mexican shippers have a long-established relationship with a broker—and it is extremely difficult and complicated to change to a new broker
- Have experienced Mexico-based resources. Seek a logistics partner that maintains dedicated trucks and trailers within Mexico, as well as dedicated warehouse and transload capacity supported by experienced Mexico-based operational personnel.
In Conclusion
There are many benefits to moving your supply chain to Mexico—and there are more reasons to consider every day. At Momentum Transportation, a Landstar Agent, we are here to help. If you are considering whether cross border logistics with Mexico are right for you, we’ll be happy to review your business requirements and help you make the best decision for your business. To find out more, visit us online at www.landstar-agent.com.