Issue #7: A Carta Porte Deep Dive

Towards the end of 2020, Mexico introduced plans to roll out the Carta Porte 3.0. As of January 2024, we still don't have a fully implemented Carta Porte 3.0 but will soon.

Alright, this one is going to be pretty technical but should be helpful for those moving cross-border freight or aspiring to do so. I’ve received a lot of calls, texts, and DMs from people in the industry asking for more clarity on what’s going on with the Carta Porte 3.0. The first few days of 2024 started off with a good amount of confusion and delays, leading to some temporary supply chain disruptions. I reached out to a few leaders in the industry who manage substantial amounts of cross-border freight, in order to get some clarity on the topic.

In this newsletter, we’re going to cover:

• What is a Carta Porte and why is it required?

• What is a CFDI?

• Complemento Carta Porte explanation

• Carta Porte 3.0 and what’s coming with these changes.

What is a Carta Porte?

One of the contributing factors to the complexity of freight moving from Mexico to the United States is the paperwork that accompanies exports from Mexico, including the carta porte, which acts in a similar fashion to a bill of lading that most U.S. logistics and transportation companies use on a daily basis. However, Mexico requires significantly more information and provides the government with more control over businesses in Mexico.

Carta Porte (pronounced: /ˈkɑr.tə ˈpɔr.teɪ/)

Definition: The Carta Porte is a legal document used in Mexico's transportation industry. It functions as a transportation invoice or bill of lading that accompanies freight during its transit. The document includes detailed information about the goods being transported, such as the origin, destination, quantity, type, and value of the cargo, as well as the vehicle used and its route.

Why does Mexico require the carta porte?

The carta porte ultimately enables Mexico to collect tax revenue but also helps the government in a few key ways:

• Verification of Goods and Services: the document includes in depth information on what’s actually going inside the truck, where it came from and where it’s going, along with the planned route.

• Prevention of Tax Evasion: strict requirements around the accuracy of the document prevents businesses from underreporting or evading taxes. It also closed loopholes that had been exploited in the past.

• Improved Tracking and Auditing: by integrating the Carta Porte and the CFDI (Mexico’s digital invoice system), it allows the SAT (The Mexican Tax Administration Service) to keep track of the sales and movement of goods.

• Compliance: in order to properly comply with Carta Porte requirements, companies need to maintain transparent records of every transportation-related transaction. Failure to comply will result in serious penalties.

• Supply Chain Transparency: the fact that the government requires this standardized and digitized documentation is leading to improved transparency for tax, logistical, and operational reasons.

Wait, what’s a CFDI?

CFDI stands for “Comprobante Fiscal Digital por Internet,” which translates to “Digital Tax Receipt via the Internet.” It’s the electronic billing system used in Mexico. CFDI is the official electronic invoice format for validating all commercial transactions in Mexico. It enables Mexico to collect taxes, which is why it was mentioned in the above section about the Carta Porte.

The CFDI includes all pertinent details about a commercial transaction, including the issuer and recipient identification, a description of the goods or services, the total amount, taxes applied, and the method of payment. This electronic document replaces traditional paper invoices. The government requires it to be generated, transmitted, and stored digitally. Additionally, an authorized service provider is required to validate and certify the CFDIs before they can be issued.

The CFDI applies to any commercial transaction, but when it comes to transportation-related invoices, the CFDI system is integrated with the Complemento Carta Porte.

Complemento Carta Porte

The next document that’s included in the cross-border process is this digital document mentioned previously: the Complemento Carta Porte. While the driver needs to carry the traditional physical Carta Porte, the Complemento Carta Porte is also required digitally. It acts as a digital extension that is integrated with the CFDI, but it doesn’t act as a standalone document. These are the transportation-specific details that complement the CFDI.

Carta Porte 3.0

Towards the end of 2020, Mexico announced the Carta Porte 3.0 as it continues to push the whole country towards a more digital future, particularly within their supply chains. It includes enhanced regulations and guidelines for the documentation of goods moved within Mexico and for cross-border freight. It also requires increased details in the Carta Porte document, including comprehensive information about the goods, their transportation routes, vehicle details, and other logistics-related data.

The improvements made to the Carta Porte ranged from the depth of details about the goods and transportation, the integration with their digital invoicing process, CFDI, improved security and compliance to fight illicit transportation practices, an electronic format with validation, and stricter enforcement and penalties.

While these changes can be concerning and frustrating, Mexico’s goal is to decrease tax evasion and improve the overall Mexican supply chain.

So what’s next?

Carta Porte 3.0 is finally being rolled out but, as 2024 kicked off, significant delays were experienced at the border on northbound crossings. I reached out to a few industry experts to get some more feedback on what happened, why, and what’s next.

Jordan Dewart, President of Redwood Mexico: “While it is being rolled out now, official 3.0 implementation is delayed until March 31st, with no fines occurring until that date. January 2nd and 3rd, things were incredibly hectic but things seem to have smoothed out. There has been a lot of confusion between the government, customs brokers, and truckers. The current administration is dead set on rolling this out and so March is really looking like a reality.”

Jess Billedo, GM of Mexico at Arrive Logistics: “Ambiguity has been a common theme with the Carta Porte implementation, which has resulted in various postponements and delays over 2 years. Fines will be applicable if a carrier is transiting within MX Territory without the CCP. Where the SAT is providing lenience, is with what version of the CCP is being utilized. The CCP is mandatory, but carriers are not required to utilize the CCP 3.0 or liable for fees until March, 31st 2024.

“Making the CCP mandatory without fines essentially is aimed to put pressure on the industry to adapt to the new regulations, but provides some flexibility with the transition. With that being said, the ambiguity causes confusion and challenges for customers, carriers, and shippers alike, as some may be in a different state of adoption than others. Our team has been working closely with our carrier and custom broker partners to ensure we are receiving the most up to date information, and as requirements continue to be clarified.”

Alex Jennings, MX Director, Carrier Sales at Coyote Logistics: “Confusion is a great way to sum up the entire situation. Our understanding of the March 31st deadline solely pertains to version 2.0 vs 3.0. No extension of fines. Carriers and shippers today must submit a CCP or risk fines, but are able to do so based on required fields in version 2.0”

Jess Billedo, General Manager of Mexico at Arrive Logistics: “This seems to be the seventh time that Carta Porte 3.0 has been pushed out as far as fines go. It appeared to be rolling out on January 1st but we’re now hearing it won’t be until March. That said, a lot of carriers are pushing to move to Carta Porte 3.0 in preparation for the changes.”

Deepak Chhugani, CEO of Nuvocargo: “As of January 1st, the fines for failing to issue a CFDI invoice with a Complemento Carta Porte regulation are fully enforceable. While we are unaware of any fines issued as of today, it is imperative that carriers correctly issue the Complemento Carta Porte with all invoices related to the Mexico leg of a shipment before the shipment leaves the origin. From what we’ve seen, transfer carriers are struggling the most with the updated process, generating issues and delays with the border crossings.”

What’s the biggest impact?

Dewart (Redwood): “In my opinion, it will be during the enforcement of the highway inspections. How will they keep seal integrity and avoid hijackings when the government/military starts doing random inspections on the highway? It’s going to be chaos!”

Billedo (Arrive): “The biggest impact is that Customs Brokers will be requiring the CCP to generate crossing documents. We’ve already seen some delays with crossings due to this, which in turn has delayed overall transits and deliveries. The large majority of the process is in effect and understood by the industry given that the CCP 2.0 has already been required for transit with Mexico. These changes will cause short term disruptions and all parties work to align on expectations and update their processes to be compliant by the end of March.”

Jennings (Coyote): “The biggest impact will be on smaller shippers and carriers that don’t have the resources or tools to properly complete the requirements for each shipment or in a timely manner. Larger businesses have been aware of the requirement and have personnel and tools in place to manage since the original discussions in 2021. The challenge today stems from the laws being vague and interpreted differently by nearly all parties.

“It will continue to be a challenge and an extra step in the cross border sales and operations process. It comes at an unfortunate time as Mexico is hot due to nearshoring and has endless opportunities if they don’t hold themselves back from capitalizing on them. Also curious to see how fines will be imposed. If there is this much confusion amongst providers submitting the ccp, is there enough knowledge across the board to enforce it?”

Bottom Line?

Personally, I’m excited about the advancement of documentation in Mexico. In a market that is so severely underinvested, the government’s push for fully digitized paperwork is going to eventually lead to more streamlined cross-border operations. If you digitize the paperwork, you can get so much more information automatically, and leverage that information for providing better visibility for beneficial cargo owners and cleaner data for everyone involved in the cross-border supply chain.

Fines can still occur if shippers and carriers don’t have an active Carta Porte and if they don’t file the Carta Porte Complemento alongside the CFDI submission. It appears that most delays have been smoothed out now that we’re a week into the new year, but I would anticipate disruption coming again towards the end of Q1 as we approach the firm deadline of March 31, 2024. This is ultimately going to benefit everyone involved in the process, aside from maybe those who were attempting to avoid paying taxes in Mexico.