Issue #10: How freight gets across the U.S.-Mexico border
There is so much complexity to cross-border freight. It's not just the language or the border, it's every part of the process.
Why did the B1 driver cross the border? To get to the other side with a load since that’s the only way B1 drivers can cross the border. Sorry, dumb joke. Let’s get into it.
Freight moving between the United States and Mexico moves across the border in a few different ways, by truck, rail, air, and even sea. We’re going to focus on over-the-road moves in this issue. When it comes to cross-border truckload shipments, you have two methods for shipping freight, transloading and direct (aka through-trailer or door-to-door, sometimes abbreviated as D2D). We’re going to use Guadalajara, JAL to Chicago, IL as our example.
Transloading
For a transload shipment, logistics companies typically hire three or four different parties to complete an end-to-end transload move. They hire a Mexican carrier to pick up the load in Guadalajara, JAL, who brings the load up to the border, Nuevo Laredo, TAM in this case, and then a transfer carrier will take that load from Nuevo Laredo to Laredo TX. Sometimes the Mexican carrier hires the transfer carrier, sometimes the freight broker hires the transfer, and sometimes the customer or customs broker hires the customs broker.
Once the freight gets across the border, it gets unloaded at a transload facility, or a cross-dock, in Laredo TX. That transload facility gets hired by the shipper or freight broker. In some scenarios the facility is owned by the customs broker, which can streamline the process, and other times, it’s a third party facility. It just depends on who’s making the decision and whether or not the customs broker can support the transloading.
The last piece of this move is hiring a U.S. carrier to move the load from Laredo, TX to Chicago, IL. Typically, you would see a Chicago-based carrier moving that load as a backhaul, which ends up being cheaper than using direct capacity with carriers based at the border. The reason why a lot of freight doesn’t transload is because it either is packaged in a way that it can’t, the beneficial cargo owner has security or quality protocols that prevent it, or they simply don’t know that this option exists. Most palletized freight should be able to be transloaded, but you’ll often see automotive, food products, and high-value goods requiring through-trailer capacity.
Direct / Through-Trailer / Door-to-Door (D2D)
The other option, the one most shippers seem to prefer, is direct capacity. The freight stays on the same trailer from pickup in Mexico to final destination in the U.S.. Here’s where things get even more complicated, as there are actually three different methods for a direct shipment moving from Mexico to the United States.
Option 1: Direct with a CDL Driver
In this case, the freight broker is hiring a carrier that’s typically based in the U.S. (or Canada) who has a terminal in the appropriate border city. So we’re going to hire a carrier in Laredo, TX that has trailers moving into and out of Mexico, in search of a carrier who happens to have trailers in Guadalajara. That carrier is going to subcontract the Mexico portion to a Mexico partner carrier, who will pick up the load in Guadalajara and bring it to the border.
Once the trailer reaches Nuevo Laredo, TAM, a border transfer carrier crosses the trailer to Laredo, TX and hands it off to the U.S.-based carrier. Their driver, a CDL driver, will take the load to the final destination.
Option 2: Direct with a traditional B1 Driver
The second method for a direct shipment is different once the load hits the Mexican border, where that Mexican partner carrier drops off the trailer. The U.S.-based carrier has a B1 driver take the load from Nuevo Laredo, TAM, cross it, and deliver it. The B1 driver is technically employed by a separate Mexican company in partnership with the U.S.-based carrier and is leased to that U.S.-based carrier.
Option 3: Direct with a B1 Driver with International Blue Plates
The Mexican government allows U.S.-based carriers to get special blue license plates for their tractors, which enables them to drive anywhere in Mexico. That means that, in some instances, the same driver with both international blue plates and a U.S. license plate will move a load under a B1 visa from a pickup in Mexico, to the border, then that driver crosses the load and ultimately delivers it, all with a single tractor and no handoff at the border. This setup is rare and only some carriers are able to do this move.
Complexity is what makes Mexico freight fun
It’s rare that you’ll find two shipments or lanes to be similar from beginning to end. Yes, you can have a similar origin and destination pairing, but usually things will diverge from there. In some instances, the customs broker manages the border crossing move, which eliminates the ability to book B1 capacity. Eliminating B1 capacity significantly decreases the amount of available trucks that can move a given cross-border load, which would typically result in increased costs.
Add in two customs brokers, two languages, two cultures, and a border and you have a whole bunch of steps where a potential error can occur. Up until recently, I actually had no idea about the existence of these blue plates that allow a single driver to go from pickup in Mexico to delivery in the United States. When the market picks up again, I wonder how often we’ll see carriers running this setup as it lengthens the time a driver who can drive in the U.S. is actually driving in the U.S., versus driving in Mexico.
Why I started Cargado
This complexity is why I felt the need to start Cargado. Trade between the United States and Mexico is going to continue to grow and the demand for cross-border capacity will grow with it. That increase in volume is going to lead to a more strained supply chain and we have a vision for how to create a better experience for everyone involved in that process. We’ve spent a lot of time with carriers and brokers, getting a deep understanding of their challenges, and working to create solutions that help solve some of those challenges. I’m excited to roll out the first part of that product this week to carriers, which is why I’m heading down to Laredo.
Sales Tactics
Speaking of launching my second startup, last week, I had the opportunity to speak at a corporate event in front of a group of top sales executives. I was asked to share my perspective on selling into startups and so I figured I would share some of that advice here as well:
Blowing up a founder on the day of a big funding announcement or product launch is the absolute worst time. Their inbox is exploding and they’re likely enjoying the launch or knee-deep in responding to critical questions from customers. Wait a few weeks to reach out, they either made their decision on your competing product months ago, or they haven’t made it yet.
Automated messaging, whether it’s via LinkedIn or email, is obnoxious and we see right through it. It won’t work. Either be specific, intentional, and personal, or just lay off blasting people with long, rambling messages that don’t land.
Don’t sell them your product right away, get an understanding of what their pain points might be and tailor your pitch around those pain points. Develop an Ideal Customer Profile (ICP) for different types of customers and how you would solve their problems.
Don’t send WebEx (or Teams) invites. Most of us use Zoom in startup land. 😉
When selling cross-border Mexico solutions to shippers, I always boiled it down to three key themes – price, service, and complexity. If they started talking about how much their current provider costs, or maybe rates were just raised, you know price is the key driver for them. If they talk about how important on-time pickup and delivery is, how critical communication is, or how the last guy kept delivering late, it’s obviously service that you’re going to focus on pitching. The last one was always my favorite – complexity – when someone doesn’t understand the first section of this blog post. They hand it off to you because they just don’t get it and they don’t want to deal with it. Take it and run with it!
You can find the key pain points your customer has and boil them down to a few simple themes and use those themes to develop ICPs and solutions that land more effectively with potential customers. Don’t just run the same playbook every single time, copy and paste.
Funny thing is that I made a joke that some salesperson from an EDI integration company was going to reach out to me after that event trying to sell me EDI integrations and, sure enough, not one, but TWO of them reached out trying to pitch me on their respective products. Major fail.
P.S., a few links to share:
If you missed last week’s announcement, you can find my full post about our $3M pre-seed round and the launch of Cargado here.
FreightWaves also covered the launch of Cargado
I joined Thomas Werdine at ThinkFreight for a podcast (Youtube | Apple | Spotify)
My brother, Andrew Silver, had a phenomenal episode with Jordan Graft, founder and CEO of Highway, on his podcast The Freight Pod (Apple | Spotify)