Enhancing Cargo Safety in the US-MX Trade Lane: Navigating Risks and Leveraging Nearshoring

Mark Vickers Nuvocargo

At the start of last year, Mexico became the US’ largest trading partner, surpassing China for the first time in 20 years. Every economic indicator and many experts suggest that this relationship will only grow. Nearshoring has become a significant driver for growth in the region, getting attention from businesses and investors on both sides of the border. Consequently, this attention has also prompted critical discussions about the benefits and risks of moving supply chains closer to home.

We’ve shared the benefits in the past, such as insights from QED’s trip to Nuevo León and their verdict on what is to come. In this instance, our focus is on navigating the risks that impact cross-border operations and how to mitigate them amidst the rise in nearshoring. With the increased demand, cargo safety has also become a growing concern.  We sat down with Mark Vickers, EVP & Head of International Logistics at Reliance Partners, who highlighted an increasing awareness of the need for robust insurance solutions among shippers within Mexico.  “25-30% of shippers were adding cargo insurance to their logistics costs last year”, said Vickers, a big step up from the 5% average that was the norm before 2023. 

Cargo Theft and Insurance Gaps

Cargo theft in Mexico has been rising for most of last year and into 2024. According to Reliance Partners’s Mexico Cargo Hijacking Data Portal, 6,030 loads were hijacked from January 2023 to September 2023, an 8% increase from the same period in 2022; this comes in stark comparison with around 2,600+ events (220 per month) of cargo theft reported in the US throughout all of 2023. According to COPARMEX, produce, groceries, construction materials, automotive, auto parts, spare parts, and domestic appliances are some of the industries most affected by safety issues.

Further accentuating this matter, many companies trading consistently between these two countries lack a clear understanding of the Mexican insurance landscape; Freight brokers and trucking companies are not liable for the cargo/ freight while it’s in Mexico, no matter the value of the goods.

Liability responsibility is regulated in the Law of Roads, Bridges, and Federal Motor Transport, which provides that permit holders of cargo transportation services are responsible for the losses and damages suffered by the goods or products they transport. However, when the service user does not declare the value of the merchandise, the liability will be limited to $90.52. Given the shallow limit, pursuance of liability actions is uncommon. However, it is possible to contract insurance to provide customers with a guarantee of the safety of their cargo through Borderless Coverage, which is quickly becoming the industry standard.

Cargo theft, particularly in regions like the Bajio, poses a significant threat to cross-border shipments. In Mexico, the need for more awareness about insurance options leads to many shippers being underinsured or uninsured. Vickers recommends using CTPAT-certified carriers and assets to counter this and enhance security. Additionally, finding the right providers offering benefits like primary coverage and streamlined insurance processes is critical to addressing the gap in Mexico's cargo insurance market.

Mitigating the risk: CTPAT carriers, freight strategies, and insurance solutions. 

For Vickers, there are three essential considerations for mitigating cargo safety concerns in Mexico: working with CTPAT-certified carriers, developing and implementing a global freight strategy similar to companies with mature logistics operations that have already applied, and securing specific insurance solutions dedicated solely to cross-border cargo. 

CTPAT carriers are a must.

The CTPAT (Customs-Trade Partnership Against Terrorism) certification ensures cargo safety. Vickers emphasizes the need for CTPAT-certified carriers and assets in the cross-border supply chain, as this certification not only enhances security measures but also streamlines the shipping process. In addition to identifying and mitigating internal security vulnerabilities and risks, partners in the CTPAT program enjoy additional benefits, such as:

  • Reduced number of CBP examinations
  • Front-of-the-line inspections
  • Shorter wait times at the border
  • Assignment of a Supply Chain Security Specialist to the company
  • Access to the Free and Secure Trade (FAST) Lanes at the land borders
  • Importer eligibility to participate in the Importer Self-Assessment Program (ISA)

When a company joins CTPAT, Customs and Border Protection (CBP) agrees to protect the supply chain, identify where security needs to be added or reinforced, and implement security measures—allowing CTPAT members to be considered low-risk and reduce examinations at the US port of entry.

Freight strategies.

To solidify operations in and out of Mexico, Vicker suggests implementing the following recommendations: 

  • Dedicated schedules & freight strategy: Trading between the US and MX OTR is an intricate process. Thus, creating a solid and bespoke strategy that prioritizes dedicated freight and establishes standardized procedures, key performance indicators, and vendor service level agreements becomes necessary. 
  • Consistent lanes: Maintaining a hierarchy of which lanes to use consistently will allow you to understand where most incidents happen and plan around those instances.
  • Trusted partners: Cross-border shipments can have up to 15 parties working with each other, which is a convoluted and unnecessary amount. Choosing ideal partners that can take up large chunks of the process will generate efficiency, and the more efficient each load is, the lower the chances it has to deal with any of these issues.

Cross-border insurance.

Regarding insurance in the US, the DOT (Department of Transportation) requires carriers to cover for at least 100,000 USD, while in Mexico, the terms are considerably different. Carriers are only responsible for 15 Mexican minimum wages per loaded ton, which translates to around 1,250 USD for a 20-ton trailer. To better protect themselves, Vickers emphasizes the importance of accessing the Borderless Coverage Program, which offers many benefits for shippers that constantly export and import between these two countries. This includes primary coverage and insurance, with an expedited digital process in case of theft.  Nuvocargo, through its partnerships with Reliance Partners, offers access to this program with much lower deductibles, ranging from 1k-10k USD, rather than the average self-insured deductible of 100k USD.

Wrapping up our chat, Vickers was clear about his view on the US-MX trade relationship. He is bullish on it growing, and even though there are risks that need to be top of mind for shippers, taking proactive steps like setting a consistent freight strategy with preferred lanes, finding the right logistics partners, and securing comprehensive cargo insurance are ways to ride the nearshoring wave, while mitigating some of the risks currently impacting cross-border logistics.

Your US/MX cross-border shipping partner.

Learn more about how Nuvocargo can help your company choose the correct cargo insurance for your cross-border shipments.

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