Have you ever wondered how your things get between here and Mexico? If not, that's probably thanks to transportation and logistics companies getting the job done. However, it's not simple, and it's very important...$376.6 billion annually important. Many Arkansas trucking companies have made this a part of their business portfolio, but one in particular has prioritized it.
Between a trucking conference in Oklahoma and my second earnings season, I have been a little caught up in my beat. But even though the story ran a few weeks ago, I thought I would still share it.
By Emma N. Hurt
Many Arkansas trucking companies include service in and out of Mexico in their portfolios, but P.A.M. Transportation Services Inc. in Tontitown has worked to make it a featured specialty.
In 2015, 5.5 million truck movements transported $376.6 billion worth of goods across the U.S.-Mexico border, and since 1995, U.S. exports to Mexico have grown 355 percent. It's an important market for both countries, though that doesn't mean it's easy.
"I've heard U.S. carriers say, 'We're going to expand to Mexico.' And I think to myself, 'How are you doing that? What's your plan?'" said Dan Cushman, president and chief executive officer of P.A.M. "Because, yeah, it's a great opportunity, but I've got to tell you, if you don't cross all your t's and dot all your i's you're going to get in trouble. I've seen carriers start a Mexican service and all of a sudden you're out because you didn't fully commit."
Besides the language barrier, the traffic laws and regulations differ vastly between the two countries. For example, Mexico has no hours-of-service equivalent on the books.
Another layer of complexity involves the U.S. Customs and Border Protection's Customs-Trade Partnership Against Terrorism program. The certification, now standard for carriers working in and out of the U.S., classifies compliant companies as low-risk, which generally speeds up border crossings. Companies must pass regular facility and equipment inspections to maintain membership.
As a result of these circumstances, most carriers' preferred modus operandi -- known as through trailer service -- entails switching a trailer between up to three different tractors and drivers: an American trucking company drives to a gateway such as Laredo, Texas, and passes off the trailer to a shuttle carrier that takes it across the border, where it is finally switched to a Mexican partner carrier that completes the delivery. Then the trailer is loaded up with new cargo and sent back to the U.S. the same way.
"In my opinion, it's a better and safer model," said Billy Cartright, senior vice president of operations at USA Truck in Van Buren. USA Truck does about 20 percent of its business in and out of Mexico using the through trailer service model.
"The Mexican drivers have done it; they know how to do it. I don't need to intervene in that," Cartright said. "It's better to leave it at that than try to educate my fleet of 2,000 drivers."
Another component of the decision is safety, Cartright said. "The safety of our drivers is important, so we feel more comfortable operating with our partners down there who know how to do it right."
Since Cushman's arrival at P.A.M. in 2009, he has prioritized expansions in Mexico, now about 45 percent of total business. P.A.M. de Mexico has an office based in Monterrey, Mexico, with 16 employees handling everything from customer service and collections to sales. They also manage 45 partner carriers and conduct annual quality control reviews of those partners.
Fernando Gonzalez, vice president of P.A.M. de Mexico, runs the office and explained that his job encompasses all components of P.A.M.'s business in the country.
"We average 750 trailers inside Mexico at a time, so one of the main responsibilities is to make sure that those trailers run in and out quickly," Gonzalez said.
This means checking on customers, handling any safety or security issues, dealing with any border problems and staying aware of new Mexican regulations.
Gonzalez explained that through trailer service has become an "industry standard," as opposed to a U.S. company adding an in-house Mexican carrier to handle its business.
Notably, J.B. Hunt experimented with this model with Hunt de Mexico in the early 1990s, though today they use the through trailer service model favored by most competitors. The company had no comment for this story.
According to Cushman, creating a Mexican entity tends not to work because customers develop trust in certain Mexican carriers and are often unwilling to take a risk on new ones. His board of directors periodically floats the idea of buying a Mexican carrier and establishing their own, which he always cautions against. When visiting prospective customers, he said, "Nine out of 10 times they will ask who we use for our Mexican carriers," and then that customer makes clear they only do business with a certain carrier.
Carriers with Mexican entities then have to approach the competitor the customer prefers to keep the business. Those other Mexican carriers, however, "know you will be trying to sell [the customer] on your own services the whole time," Cushman said.
Beyond that, it is difficult to get insurance coverage for a Mexican entity, said Sean McNally, vice president of public affairs and press secretary of the American Trucking Associations.
Even though ABF Freight and ABF Logistics make less than 5 percent of their revenue in and out of Mexico, Kathy Fieweger, chief marketing officer for Fort Smith-based ArcBest Corp., called it "very" important to their portfolio. "It's about capabilities and full-scale supply-chain services," she said.
Cartright at USA Truck called it a "critical" part of their offerings. "It's another feather in our cap to say that we can provide this solution."
"Our Mexico service operations differentiates us," Cushman said. A reputation for being able to manage that process lends P.A.M. "instant credibility," he explained, because others know how complicated it can get.
"I look at Mexico as a brotherly country," he said of doing business there. "They're an extension of who we are and what we are. And when I go to Mexico, I believe that that's how they view me. It's such a great partnership."