Today’s world requires companies to operate increasingly complex supply chains to optimize their results. This new world view challenges shippers with import and export obstacles they have not previously had to negotiate, as both customers and suppliers do not all reside within the confines of the United States.
With that in mind, it is imperative for cross-border shipping excellence to move product expediently and efficiently for the least cost while maintaining control and visibility for all the stakeholders in the process.
With roughly one-third of US exports/imports with commerce between US-Canada-Mexico, it is critical to keep their focus on being great with their cross-border logistics and supply chain strategy.
This article is to help companies improve and fine-tune their cross-border shipping by reviewing:
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Cross-Border Challenges Shippers Face
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Outline Cargo Movements
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Discussion on Paperwork Process and What to Include
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Insurance Practices
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Specifics to Either Canada or Mexico Cross-Border Shipments
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Custom Broker Requirements
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Security
Cross-Border Shipping Challenges
The long and short of it is if a company does not make cross-border shipping a priority they will damage customer relationships that will lead to a single purchase versus a long-time multi-order buyer; find orders are cancelled; and reship lost or damaged orders.
Below is a short list of the challenges:
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Border Delays
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Tariffs
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Customs Compliance
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Regulatory Issues
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Incomplete or Inaccurate Paperwork
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Inaccurate Labeling
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Visibility of Shipment through Shipping Process
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Longer Transits
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Costs
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Higher
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Some Unplanned Costs
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Processing Costs
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Security
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Risk of Loss and / or Damage
While these challenges sound daunting, cross-border shipping amongst US - Canada - Mexico is not as difficult as one may think.
Operation and Paperwork Process for Mexico
Before jumping into the process of cross-border shipping between the US and Mexico border, keep in mind when negotiating rates that there is far more southbound traffic than northbound. On the negative side, this traffic pattern often makes it difficult for southbound capacity at various times during the year, while on the plus side shippers with northbound traffic or balanced lanes of their own will find preferential rates.
With pricing behind us, the entire process of cross-border shipping is fairly straightforward, as long as you have the rulebook in hand which is what we are addressing next.
First off, companies need to know the operational restrictions. Mexico law restricts US carrier tractors to go further than 26-kilometers into Mexico. The US has similar rules. So, there are times it makes more sense to transload a shipment before sending it in either direction. This restriction can be a benefit for intermodal shippers because this rule does not apply for intermodal containers moving via rail, meaning the shipment does not stop at either border to be unloaded and re-loaded.
Basic Paperwork Required for a Mexico Bound Shipment:
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Commercial Invoice – This document contains detailed information about the goods being shipped, the buyer and seller, volume of goods and other relevant details for purposes of assessing tax and duty, which is important at the border.
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Bill of Lading (BOL) – Bill of lading bears detailed information about the owner of the shipment as well as the destination and exact pick-up point. The shipping company usually provides the lading bill to the recipient of the goods at the pick-up point.
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NAFTA Certificate of Origin – Completed by the exporter, the NAFTA Certificate of Origin (Form 434) certifies that the goods being shipped qualify for preferential treatment under the terms of NAFTA. The document is presented to the customs agent at the border as proof that the goods and/or materials originated in the United States, Mexico, or Canada. It can be completed in Spanish or English.
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Import / export form - In the US, a Shipper’s Export Declaration (SED) is required for any shipment valued at $2,500 or more.
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Export License – this document is necessary only for regulated products such as alcohol, tobacco, firearms, and others.
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Cargo Control Number – for easy identification of goods.
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Other documents include: Material Safety Data Sheet, Packing Slip, Letter of Instructions (La Carta de Instrucciones), Inward Cargo Manifest, and Freight Invoice.
Cross-Border Paperwork Process for Shipments between US & Mexico
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Email the commercial invoice and bill of lading simultaneously to the logistics service provider (LSP) and the customs broker, prior to or at the time of pick-up.
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It is the responsibility of the Broker to file for the clearance.
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The LSP creates the waybill for the driver, which the driver sends to their office for imaging since the documents travel with the container.
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Give copies of the commercial invoice and bill of lading to the driver before departing from origin.
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It is recommended that the shipper put copies of both documents in the container itself in the event the paperwork somehow gets lost or damaged.
Additional Paperwork for Mexico Freight Shipments
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When exporting to Mexico, the services of a United States Freight Forwarder (USFF) and a licensed Mexican Customs Broker (MCB) will be needed for transit.
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In most cases, the USFF and MCB are one and the same, but confirm as much.
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When importing from Mexico, the services of a licensed MCB and a licensed United States Customs Broker (USCB) will be needed for transit.
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In most cases, the MCB and the USCB are one and the same, but double check.
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With a signed power of attorney, the receiver/importer authorizes the broker to act as their agent and the Mexican Shipper/Consignee will need to register the MCB with the Mexican Treasury Department.
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It is the broker’s fiduciary duty to inform their client of all pertinent regulations and the manner by which to comply with the same.
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Broker works with the shipper to obtain the required documentation to classify the products being imported for applicable duty rate.
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Broker will present the required declarations and the “empty package” to customs for release.
Mexico Custom Broker Requirements
Unlike the US, Mexico does not allow foreign importers of record. Mexico regulations require the importer must be a legal Mexican entity, register as an active importer and verify they are established with a specific Mexican broker that is authorized to clear shipments on the importer’s behalf.
When importing from Mexico, the Exporter of Record must employ a Mexican Broker to clear the shipment through Mexican Customs. The Importer of Record also employs a U.S. Customs Broker to clear the shipment through U.S. Customs. The Mexican Broker provides the bridge transfer across the border and coordinates the U.S. entry with the U.S. Customs Broker.
Insurance Practices for Mexico
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Cargo moving between the U.S. and Mexico is considered international freight, which is governed by international laws of commerce and carriers have limited cargo liability.
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U.S. insurance is NOT valid in Mexico and it is illegal to contract foreign insurance firms (i.e. any insurance firm outside of Mexico) to cover risks in Mexican territory.
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The shipper or receiver may obtain coverage on the unit in Mexico through their MCB or an outside insurance agency in Mexico.
Operation and Paperwork Process for Canada
The dollar value of goods moving via surface transportation between the US and Canada border continues to increase. The volumes are trending up as U.S retailers increase their Canadian presence. Generally speaking, asset carriers have roughly 3 northbound loads for every 1 southbound.
Cross-Border Paperwork for Shipments between US & Canada
The paperwork requirement is the same, as outlined in the above Mexico cross-border shipment paperwork requirement, with Canada having their equivalent import paperwork requirement.
The key documents required for shipping into Canada to prevent delays.
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Canada Customs Invoice or a Commercial Invoice.
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Bill of Lading.
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Manifest or Cargo Control Document.
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Shipper’s Export Declaration.
Cross-Border Paperwork Process for Shipments between US & Canada
Freight travels efficiently at the US-Canada border, so speed of paperwork filing by the broker is of the essence.
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If the entry is not filed by the broker, the driver will be held at the shipper’s dock which can result in detention and/or layover charges.
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Customs broker is responsible to file for clearance.
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LSP will create the waybill for the driver.
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Give copies to the driver and place copies of both documents in the container as well as an added measure.
Insurance Practices for Mexico Canada
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Note that cross border service between the United States and Canada are considered international transactions and are subject to customs related mandates.
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Generally speaking, U. S. Insurance is valid in Canada, but to be on the safe side, we recommend that as a shipper you confirm for certain with your broker. Laws and requirements seem to change rather quickly these days.
Intermodal for US - Mexico Cross Border Shipments
Up until this point, our discussion has been freight mode agnostic, but as was mentioned earlier the regulation both the US and Mexican governments have on the distance a foreign driver and trailer can enter each other’s territories can add additional time and cost.
This can be avoided by utilizing intermodal for the US - Mexico cross border shipments, but before we get into the details we need to hit a little history because some of us that have been in the logistics and supply chain industry may shy away from intermodal because of past knowledge.
Before 1995-1996, the Mexican railroad was government owned. Several years prior to 1995, the Mexican railways saw virtually zero investment and a rapidly declining employee base. Since that time, the new owners of the Mexican railroads have been playing catch-up through huge investments to get back on track. The good news is with investment continuing to go into cross-border intermodal needs, the service is transforming from a door-to-door rubber tire service to a steel wheel solution.
A rubber tire intermodal service is defined as the intermodal box moving via train to a border crossing points; clears customs at the border; then the container is transported into Mexico for final delivery. The load is not transloaded, but interlined.
Rubber tire intermodal service is used for all other border crossing points. Like truckload border crossing, inspections are random so unexpected delays may occur. The broker relationship is KEY to successfully moving cargo between the US-Mexico border. While an effective service, it is not necessarily the most efficient.
The Rubber Tire Service operates as follows:
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The container moves via train to a border crossing point.
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The box clears customs at the border.
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The container is then transported into Mexico for final delivery.
With steel wheel service, the train travels to the border; the crews change on the train at the border; and then the same train continues down into Mexico. Steel wheel service is the end goal for shippers and intermodal transportation providers. The reasoning is fewer touches; efficient streamlined clearance; and significantly more secure.
The steel wheel service steps up security in a big way for freight traveling in Mexico. It is significantly more difficult to hijack freight from a train than a truck, so any time a shipper can get its freight off the Mexican roads puts a huge relief to the loss and prevention personnel within its organization.
Like truckload freight moves in Mexico, US cargo insurance is NOT valid in Mexico, so shippers need to independently purchase the cargo coverage from a Mexican insurance company or broker themselves. At this time, steel wheel service is only available for traffic cleared through Monterrey.
The Steel Wheel Service has a few more requirements:
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Only available if the assigned broker can clear in Monterrey.
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The customs broker prepares the export documentation, with commercial invoice.
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Documents sent to the railroad.
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It is incumbent upon the shipper to contact its customs broker at least 24 hours prior to shipment.
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The IMC, intermodal marketing company, covers the door-to-door transit and border-crossing fees, while the customs clearance is done by the shipper’s broker and charged directly to the shipper.
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Keep the load legal and review the proper Blocking/Bracing and Weight requirements.
The conversion to intermodal on the northbound lanes reduces the number of assets a carrier needs to be successful with its customers, which translates to improved P&L and balance sheets. Shippers and carriers will find tremendous savings in lanes originating in the Midwest and South with a Western Canada destination. Also, shipments that weigh out before they cube out, on a standard 53' container, will really appreciate the additional savings 40' containers can bring.
As with all domestic intermodal moves, weight and blocking and bracing are important factors of the load to ensure it remains legal from origin to destination. There are a few complexities with US and Canada cross-border shipping, but really not much more than what is needed for a standard truckload crossing the border.
Intermodal Cargo Movement into Canada
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Door-to-door intermodal service at the Canadian border is a Steel Wheel service, not Rubber Service.
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The Canadian service follows the Canadian railroad networks as noted in the above chart
Using a Logistics Service Provider (LSP) for Cross-Border Shipping
LSP provides a great deal of value in helping companies with their cross-border shipping requirements. To that end, over 50% of shippers are using LSP’s to help them through the process by simplifying the process with a single point of contact that does this work for a living.
While an LSP is the single point of contact, they are the experts to help in deciding all the alternatives available for cost, transit, communication and transparency.
Also, through an LSP a company can roll the cross-border shipping requirements into a full managed transportation service solution to bring all communications into one resource.
If you're ready to take the next step, at InTek Freight & Logistics, we can help. Just tell us what you need and we'll discuss how our expertise can help with the unique shipping challenges your business faces. Rather do a bit more research first? View our Freight Guides for comprehensive articles and eBooks on all things freight and logistics.
If intermodal still sounds like a good fit for your company, we recommend reading our in-depth article entitled The Completed Guide to Intermodal Transportation, which is comprissed of the following chapters:
- INTERMODAL VS. TRUCKLOAD SHIPPING: A SIDE-BY-SIDE COMPARISON
- IS INTERMODAL TRANSPORTATION THE RIGHT FIT FOR YOUR COMPANY?
- COMMON ISSUES AND MISCONCEPTIONS AROUND INTERMODAL TRANSPORTATION
- THE BENEFITS OF INTERMODAL TRANSPORTATION
- THE COST OF INTERMODAL TRANSPORTATION
- GETTING STARTED WITH INTERMODAL TRANSPORTATION
