December 2, 2021
Risk knows no bounds when it comes to cross-border shipping
Customers appreciate the 411 on Mexican cargo liabilities
Cross-border shipping involves numerous — and often hidden — risks. For instance, many U.S. shippers are surprised to learn that they’re on the hook for cargo losses that occur all too frequently south of the border.
Mark Vickers, Reliance Partners’ executive vice president of international logistics, connected with Jose Minarro, managing director of Sunset Transportation, to discuss the ever-present risks associated with cross-border shipping, the importance of carrier vetting and why Mexican cargo insurance is a must-have in this day and age.
Vickers notes the lopsidedness that is Mexican trucking in that carriers have liability coverage for their trucks but not for its cargo, aka your cargo.
He’s extensively detailed the disparities in freight practices between the U.S. and Mexico in previous FreightWaves articles. One is that carrier liability in Mexico is nearly nonexistent, as carriers aren’t required to provide coverage for shipments, leaving shippers on the hook for damages. U.S.-based motor carriers can be liable for up to $1 million in cargo loss, while Canada-based carriers have a maximum liability of $2 per pound of freight. In contrast, Mexico only requires carriers to be liable for 2.5 cents for every pound transported.
It’s ironic that cargo insurance is scarce in such a Wild West environment for trucking — especially considering that crime rates south of the border haven’t improved: More than 5,000 cargo thefts were reported in Mexico during the first half of 2021 alone.
Minarro knows just how valuable visibility can be when operating in Mexico, which is why Sunset utilizes tracking technology through the entire shipment process from point of origin to final destination. He credits Sunset’s well-established tracking team for monitoring fleet movements on its TMS platform, including expected transit and dwell times.
If for whatever reason a truck veers off the suggested route or makes an unannounced detour, Minarro said that driver will be contacted immediately. “We take action to provide [customers] with visibility, but beyond that, it’s a lot more important to show the customers how you’re going to act if something goes wrong.”
According to Minarro, the truck and trailer themselves — especially newer models — are of high value to criminals. This was evident earlier this year when a load for one of his shipper clients from South Carolina was hijacked in Mexico. The thieves weren’t targeting the cargo but the trailer itself. Minarro uses this story in every sales call he makes, warning of the many reasons why a truck may be targeted in Mexico.
“We tell [our clients] the story about that small shipper because I think it’s much easier to grasp the reality of the risk involved when you flip a coin to figure out if everything’s going to run smoothly or not,” Minarro said. “It’s not a matter of identifying if your cargo is attractive or not, or if it’s going to get stolen — it can be for many different reasons, which is why it’s much better to ensure than to run the risk.”
He finds many shippers are simply not entirely aware of the gravity of the situation and proceed south of the border unaware of the risks.
But Minarro and his team at Sunset Transportation make sure their shipper clients are fully aware of the risks associated with cross-border freight and ensure they’re properly protected from its liabilities before a single load goes across the border.
“When we talk about the value of their goods, that’s when a light bulb goes on; we ask if there’s any shipment they’re prepared to lose and get zero money back,” Minarro said, adding that the usual response is that all shipments are of value and often are irreplaceable. “We have the conversation and take it to a level where they make a conscious decision to take or not to take the insurance.”
Minarro said he has these conversations on the front end because the last thing he wants is for customers to feel misled; he avoids leaving clients with the task of finding the cargo liability terms and conditions in the fine print.
“The Sunset approach is to be totally thorough with them upfront; nobody likes to give them bad news, but somebody has to,” Minarro said.
Vickers commended Sunset for proactively offering Mexican cargo insurance, breaking the norm of most motor carriers and freight brokers that would typically have shippers sign liability waivers and call it a day. He said that groups like Sunset that offer this coverage upfront are standing out from the competition and are winning more business because of it.
Headquartered in St. Louis, Sunset Transportation has more than 20 offices across the United States. The 3PL began its Mexico cross-border operations from scratch in 2019 thanks to the efforts of Minarro, who lives in the border town of Laredo, Texas. Sunset now has branch offices across the line in Nuevo Laredo, Mexico, and farther south in Queretaro, along with an extensive customs broker and warehousing network throughout the country.
Minarro’s team started Sunset’s Mexico operations to cover the portion of the Mexican market that often wasn’t looked after, specifically small and midsize enterprises. Sunset’s Mexico division has since grown to move around $250 million in goods across the U.S.-Mexico border per year.
“I realized pretty soon that there was this specific part of the market consisting of very small shippers that really needed a lot of hand-holding, especially U.S. companies in desperate need of a partner that’ll step them through the right way of doing business in and out of Mexico and has the patience and allocated resources to do so.”
It’s one thing to walk shippers through the cross-border process, but Minarro explains that logistics providers must play both sides of the ball — defense and offense — in terms of risk mitigation. This means taking proactive measures to vet your cross-border drivers is crucial.
Sunset goes the extra mile when finding new talent, meeting with carriers face to face, going as far as touring their operations. The process also involves carriers giving presentations on their business strategies and the robustness of their safety programs.
Minarro detailed Sunset’s carrier strategic account management program, which runs monthly KPI metrics to determine whether its carriers are meeting compliance standards and security protocols. The team meets with its carrier clients every three months to review their performance.
“There’s not many other freight brokerages or 3PLs that have these type of in-depth conversations with their carriers, so it’s refreshing to see some collaboration between Mexican trucking groups and large U.S.-based freight brokerages who are expanding into Mexico,” Vickers said, explaining that Mexican carriers and U.S. shippers usually don’t see eye to eye. “It’s great that Minarro and his team are working hard to actually form long-term relationships.”