Issues Requiring Attention by Mexican Motor Carriers Operating in the United States
  

1. Registration Process. The U.S. Department of Transportation's Federal Motor Carrier Safety Administration ("FMCSA") has adopted rules governing applications by Mexican-domiciled motor carriers. FMCSA has developed two applications: one for Mexican-domiciled carriers seeking to operate in the commercial zones adjacent to the U.S./Mexico border (even those Mexican-domiciled carriers already registered with FMCSA to conduct these operations must file the new form and provide the additional information); the other for Mexican-domiciled carriers that seek to operate in the U.S. beyond the commercial zones. The information required on the forms is quite extensive. Mexican-domiciled carriers must provide information about their past operations, safety and maintenance programs, as well as their ability to comply with U.S. laws and regulations and other information. The rules require written descriptions of their safety and compliance programs and certifications that the applicant is and will be in compliance with applicable U.S. laws and regulations. Over half of the applications filed with FMCSA by Mexican-domiciled carriers have been rejected because they were not correctly completed. Carriers applying to operate in the U.S. should seek the assistance of someone who understands U.S.DOT/FMCSA to explain the provisions and execute the applications.

2. Insurance. Mexican carriers registering to operate under NAFTA in the U.S. will be required to obtain permanent insurance, both for bodily and property damage and for cargo loss and damage. There are specific requirements in U.S. law and FMCSA regulations as to the level of insurance that a carrier is required to maintain depending on the types of cargo it will be transporting. Further, the insurance company must meet certain requirements and file specific forms and endorsements. If the carrier and the insurance company do not comply with all the regulations, or make even minor mistakes on the forms, the carrier's registration will be delayed, denied or suspended.

3. Domestic Operations. U.S. law prohibits a Mexican domiciled motor carrier from operating in the domestic United States market. But, the law no longer prohibits a Mexican national from owning or "controlling" a U.S.-domiciled motor carrier with domestic U.S. operations. It will be important for Mexican carriers to understand the legal differences between "international traffic" and "domestic traffic" before entering into partnerships with U.S. companies or creating U.S. subsidiaries.

4. Immigration/Customs

   • Cabotage. U.S. law has different definitions of "domestic traffic" (also known as "Cabotage") for purposes of equipment, drivers and carrier behavior. Each agency has its own definition which applies to its area of jurisdiction: U.S. Department of Transportation (governing the licensing of the Mexican carrier in the U.S.), U.S. Customs Service (governing the operation of foreign-based equipment in the U.S.), and Immigration and Naturalization Service (governing the use of foreign drivers and other workers in the U.S.). The same physical operation that may be legal for Mexican-based equipment may be illegal for Mexican drivers.

   • Cabotage Penalties. Operation by a carrier, a vehicle, or a driver that violates an agency's rules can have serious consequences. Depending on the agency involved, it can result in suspension of the carrier's U.S.DOT registration, confiscation of its equipment, jailing, deportation and/or banning of the driver, and/or substantial fines (as much as $50,000.00 per incident). It is therefore important for a carrier to understand the definition applied by each agency and exactly how its equipment and employees can be used.

   • In-bond and other Customs rules. Since many of the carriers that will now be operating into the U.S. will not be the same Mexican carriers that been traditionally conducting the cross-border drayage operations, these carriers will have to familiarize themselves and their drivers with all applicable U.S. Customs and export control rules and regulations. They must become familiar with all paperwork requirements, in-bond rules, our Cuban economic sanctions, and other matters.

5. Drug and Alcohol Testing. All carriers operating in the Untied States are subject to drug and alcohol rules. The U.S.DOT has just recently revised its rules. FMCSA has its own rules that supplement the U.S.DOT rules. All motor carrier employees that are involved in safety sensitive functions are subject to four types of drug and alcohol testing procedures: pre-employment, random, post-accident, and reasonable cause. The regulations governing this testing process are over 100 pages long. They govern who must conduct each step of the testing process, what records must be kept, how the test is done, who may evaluate the sample, etc.

6. Drivers

   • Qualifications. FMCSA has specific rules governing the qualification of drivers and record keeping requirements. Drivers are required to pass a physical examination every two years and drivers with certain physical ailments (e.g. epilepsy, vision in only one eye, or untreated diabetes) may not be permitted to operate a commercial vehicle in the U.S. without prior FMCSA approval.

   • Hours of Service. One of the hottest issues in the industry today concerns permissible hours of service for motor carrier drivers. While in the United States, Mexican drivers are subject to these rules and the carrier and driver must maintain proper records. Since the rules apply to how many hours of on-duty and off-duty time a driver may have during any seven day period, the driver and carrier may have to maintain records of the drivers hours prior to the driver entering the U.S.

7. Equipment. U.S. DOT also has specific regulations governing commercial motor vehicles. There are two agencies at U.S.DOT that govern this matter.

   • Manufacturing. National Highway Traffic Safety ("NHTSA") Administration regulates new equipment. This includes the type of brakes required on a vehicle, the lighting of a vehicle, the need for reflective tape on trailers, and other matters involved in the construction of commercial motor vehicles.

   • Maintenance and operations. FMCSA regulates the maintenance and operation of the commercial motor vehicle. Carriers are required to have daily and periodic inspections of their equipment. Brakes must only be inspected and maintained by certified personnel. Specific records of operations and maintenance must be maintained.

8. Size and weight. Both federal and state governments have laws and regulations governing the permissible size and weight of commercial vehicles. These laws not only limit the gross size and weight but also govern how much weight a vehicle may carry on each axle. Some states have route restrictions based on the type of vehicle or the nature of the cargo. Federal size and weight laws apply only to the interstate highway system and a network of designated highways. Certain states, such as New Jersey, have prohibitions on through trucks operating on certain highways.

9. Fees and taxes. Motor carriers are subject to a complex network of fees and taxes imposed by the federal and state governments. These include heavy vehicle use tax, fuel taxes, state vehicle registration fees, single-state registration system, sales taxes, hazardous materials registration fees, and ton mile taxes to name just a few.

10. Cargo liability. Carriers in the United States are liable for the full value of the cargo they transport. While there are ways for a carrier to limit its liability, there is no consistency in the application and interpretation of these rules in federal or state courts.

11. Labor laws. The federal and state governments in the U.S. have labor laws that apply to just about anything an employee does or that happens to him/her. Mexican carriers should try to obtain a general knowledge of these laws and have ready access to experts in the United States able to advise them on such matters. Although not all these laws will apply to Mexican carriers operating in the U.S., it is important that Mexican carriers know which laws do apply and under what circumstances.

12. Other Federal Regulations. Administrative agencies and departments in the U.S. federal government are constantly proposing new or revised rules and regulations. These rules are sometimes generated by acts of Congress, other times they may be generated by the agency or department on its own or in response to a petition filed by an individual, company or association. These administrative rules may have a more dramatic effect on companies and persons doing business in the United States than does an act of Congress. As Mexican carriers prepare to operate in the U.S. and even more so once they are operating in the U.S., they need to be aware of both proposed and final rules and regulations.

13. Contracts. Mexican carriers should seek advice from experts knowledgeable in U.S. law and logistics when negotiating transportation contracts, leases, and other agreements relating to their operations in the U.S. This may be the most important area for Mexican-domiciled carriers to ensure that they have expert U.S. counsel to provide assistance. The proper construction of contract terms involving cargo liability, extension of credit, service requirements and guarantees, customs responsibility, and other contract provisions are essential to a successful operation.

14. General Corporate Matters. Mexican carriers operating in the United States will also need advice on general corporate matters such as taxes, real estate, and environmental law, as well as assistance with matters such as accident litigation and collection of freight charges.

Strasburger attorneys are available to assist Mexican motor carriers in all of these areas.

     
STRASBURGER & PRICE, LLP  •  DISCLAIMER