California again takes the lead in denying demurrage and detention charges by marine terminals and intrmodal equipment providers, such as chassis providers, when return is prevented by actions outside the control of the users. Such conditions might include gates being unavailable for return, a provider diverting the equipment from the original intrchange location, and when the carrier documents an unsuccessful attempt to return the item, or because a vessel’s booking date is changed.
All these changes will be good for the business. They will force carriers and equipment providers to pay attention to the effects of congestion, and work to reduce it.
Congratulations to California for this law. Now let’s see how it works.
Changes in the Mexican government’s regulations for bills of materials and shipment documentation are poised to take effect January 1, 2023. The changes are substantial, and require much more data collection.
I interviewed Josefina Blanco, Legal and Compliance Lead at Nuvocargo, talking from Mexico City. She’s a lawyer, and an expert on Mexican trade regulations.
Nuvocargo is a full-service digital platform for US-Mexico trade, offering freight forwarding and brokerage services, customs broker services, cargo insurance, and supply chain financing for both shippers and carriers. They specialize in 53-foot truckload transport.
The genesis of the new regulations is the Miscellaneous Tax Resolution, passed in Mexico in June 2021. That act imposes new Bill of Lading requirements on anyone moving cargo within Mexico, as well as into and out of Mexico. The new requirements are captured in documents known as Complemento Carta Porte or CCP. They require more detailed information to accompany each shipment, verifying its origin and ownership. It’s an attempt to reduce contraband, an important problem for Mexican trade.
There are severe penalties for non-compliance, including loss of ability to operate, fines, and felony charges. Originally, the regulations were to have begun with spot checks in 2021, but fines were not to occur till January 1, 2022. The deadline for enforcement has slipped five times. Now authorities insist that January 1, 2023, will begin enforcement with sanctions.
The Mexican authorities, according to Josefina, included design criteria that help make the CCP and bill of lading electronically compatible. However, the present result seems to contain a lot of redundant information in its over 200 fields. That means a computer system to prepare the forms is almost essential for efficiency, though it is legal to fill the CCP in by hand. Josefina Blanco indicated that about 20% of firms in Mexico are building software themselves to comply.
Now you would think that large firms would not oppose this regulation too much, because they would be in a good position to provide correct CCPs. However, the deadline slips were due to objections from larger companies, represented by industry organizations. Josefina says this was due to the considerable difficulty of programming computer systems to gather data and create the CCP documents correctly. System development takes time and cost, and collecting the information could add as much as 15% to the freight bill, according to Josefina. Many smaller carriers and businesses do not have what’s required to meet these new requirements, and have not started yet.
Brokers themselves are not required to file the CCP forms; according to Josefina, shippers and carriers are the ones in the spotlight. But freight brokers like Nuvocargo, who specialize in Mexican and US transport, can provide service which insures compliance for their loads. Nuvocargo, for instance, includes both shippers and carriers in their offering. Carriers they suggest are likely ready to meet the new rules. and Nuvocargo’s digital platform for managing a shipment collects the proper information and provides the proper CCP documentation, paper and electronic.
Josefina indicated that Nuvocargo specializes in international trade crossing the border at Laredo, TX, US/Nuevo Laredo, Tamaulipas, MX. This port of entry is one of the largest in the US. I was surprised to learn how much truck traffic crosses this border every day. Recently, congestion has grown so great that the US government is expanding several smaller border crossings in Texas to handle larger amounts of traffic. They may provide alternatives for avoiding the congestion at Laredo.
Nuvocargo has recently received major injections of new capital, showing that they are meeting a need perceived by investors as growing. One of their investors is Flexport, the San Francisco unicorn of user interface (UI) based freight brokerages. Other top investors include Tiger Global, one of the largest funders of entrepreneurial firms, and YCombinator, the MIT-related incubator of startups. This article from Techcrunch details the recent trajectory of the company from an entrepreneurial perspective.
Nuvocargo has offices in New York City, a major financial center and hotbed of entrepreneurial activity, and in Mexico City, MX.
Obtaining a chassis from a pool is a good idea for some truckers. But beware the terms and conditions. The article indicates that pools, often owned by leasing companies and investment houses, have a goal of making money. I believe the biggest risk of renting from a pool is that the pool may be cheating on maintenance, so the chassis you pick up may have deficiencies that show up during the trip. In that case, the trucker must fix it at her expense. It’s always true that who is in possession of the chassis is required to pay for fixing the problems that occur on the trip.
Some pools, such as the one in SoCal connected with the ports, have union workers doing the maintenance. There’s probably less risk of under-maintaining chassis there. But privately operated pools have an incentive to cheat on the maintenance, because they can lay it off on the truckers.
And there is information asymmetry. There are few figures on the incidence of repairs for chassis from various pools. Such real data would inform everyone whether a pool is doing enough preventative maintenance. But without such data, it’s just a gamble for the trucker.
The article claims carriers are better off purchasing their own chassis. But I’m not convinced. Owning the chassis requires an upfront expense, or a lease, which is money out the door. If you buy the chassis you will need to put it to use often to recover your investment plus your profit. You now have to do all the maintenance. And chassis vary for different needs; a chassis for forty-foot ocean cargo won’t fit twenty-foot ocean cargo; or you might need a reefer-compatible chassis. Unless you have high predictability, you are better off taking what you need for each load.
My understanding of the situation in Europe was that chassis were mostly owned by the large drayage firms. That prompted the movement several years ago by ocean carriers in the US to divest themselves of chassis, to try to get the truckers to own them as in Europe. But as the author points out, most drayage drivers in the US are owner-operators, and don’t work for a large firm. They can’t support the capital expense of a chassis unless they are convinced that they will be able to employ the chassis for money on most loads. We did a paper on this in 2014. They would need to believe that they could almost always get paid for using the chassis. But that isn’t the way it is; somewhere around 40% of all cargoes come with a chassis provided by the ocean carrier. And that is going up nowadays, with ocean carriers getting into last-mile and end-to-end delivery promises.
So I wonder. But there should be ways to make maintenance data more visible, and make it easier for truckers to dispute charges for chassis repairs if the repairs should have been done at the pool first. I’m afraid that will be quite a while coming, though.