No matter what business you’re in, or what industry you occupy, getting your cargo to its end customer in good condition is important. Knowing that your freight will be safe along the way — in reliable hands and financially supported — should be a non-negotiable piece of your carrier vetting processes. And, to this point, it probably has been.
That said, shipping freight through both the U.S. and Mexico can be a confusing process for many companies — especially when they don’t do so often.
Of the many rules and regulations governing transportation in these countries, few remain consistent across the border. For this reason, without doing some pre-emptive research — and working with experienced partners — it’s not uncommon for less-seasoned shippers to run into issues.
Carrier liability is not managed or regulated the same in Mexico as it is in the U.S.
Without understanding how cargo liability coverage differs between these countries, however, you might find yourself under-insured and without a solution should freight damage/losses occur.
Here at Anderson Trucking Service (ATS), we’ve been helping companies move freight over the U.S-Mexico border for decades now. During this time, it has become clear just how confusing cargo liability rules and regulations can become without proper explanation. Additionally, the shippers that don’t understand how their cargo is protected when moving across the border, sometimes fail to take the necessary steps for protecting it.
In this article, let’s go over how carrier cargo liability functions in both the U.S. and Mexico so that you can plan your next shipment with the right information.
How Does Cargo Coverage Work in The U.S.?
In the U.S., claims for loss or damage to cargo transported over the road and across state lines are usually governed by 49 U.S.C. § 14706 (commonly referred to as the Carmack Amendment). Under this statute, motor carriers are generally liable for the full actual loss, damage or injury to cargo that occurs during transport.
The carrier’s liability under the Carmack Amendment is unlimited unless otherwise agreed. In practice, this means that most carriers will insist on some sort of limit (whether on a bill-of-lading, a transportation contract, a rate confirmation or a tariff), often stated in terms of a maximum amount per trailer used or a maximum value per pound of cargo.
In the U.S., the most common liability limit used today is $100,000 per trailer used (and, not coincidentally, $100,000 is also the most common amount of cargo insurance coverage that a U.S. carrier will have in effect).
That said, it’s not uncommon for trucking companies to offer shippers heightened limit levels when requested — often segmented into $250,000, $500,000 and $1,000,000 levels — coupled with corresponding cargo insurance coverages in those amounts.
As such, the cargo liability and insurance coverages in place across the U.S. leave shippers with little to worry about regarding responsibility for cargo losses — provided their freight’s value mirrors the provided coverages and that the applicable insurance doesn’t exclude the particular type of freight.
These regulations and practices, however, exclusively apply to freight transportation within the U.S. and, as a result, don’t cover a load once it crosses international borders.
How Does Cargo Coverage Work in Mexico?
The Secretaría de Comunicaciones y Transportes (SCT) — the government agency responsible for overseeing truck movement within Mexico — handles cargo liability coverage differently than in the U.S.
The Law of Roads, Bridges and Federal Motor Transportation, a Mexican law passed in 1993, addresses the cargo liability of motor carriers in Mexico.
Under Chapter II, Article 66, subpoint V, the Law of Road, Bridges and Federal Motor Transportation states “Where the value of the goods is not declared by the service user, the liability shall be limited to the amount equivalent to 15 days of the general minimum wage in force in the Federal District, per tonne or the corresponding proportional share in the case of lower weight shipments.”
Put simply: if the owner of the freight does not specify its cargo value (coupled with an additional charge, which is discussed in Article 67), the carrier is only responsible for paying out a maximum of 15 days' worth of the current Mexican Federal minimum wage should damage/theft occur.
As of January 1, 2022, Mexico’s general daily minimum wage was raised to 172.87 pesos — the equivalent of $8.41 USD.
This leaves a 20-ton freight shipment, of undeclared value, covered up to $2,523 USD when traveling through Mexico — a dollar amount that barely scratches the surface of protecting a 40,000-pound shipment.
If the cargo’s value is declared by the shipper, an additional fee can be paid (to the carrier) to cover the cargo further. The extent of this coverage varies and seldom covers the entire cargo value declared.
For this reason, it’s recommended that shippers insure their products differently when transporting them through Mexico.
How Can You Make Sure Your Freight is Properly Covered?
As you can see, cargo coverage practices in Mexico vary from those regulations overseeing U.S. motor carriers.
Usually, cargo coverage offered by a U.S.-based carrier won’t extend beyond the border. As such, it’s imperative that you take the necessary steps to protect your freight within Mexico.
The two common ways to insure your cross-border cargo when shipping within Mexico are to:
- Receive insurance through your logistics provider
- Self insure using cross-border coverage.
Receive Insurance Through Your Logistics Provider
Upon request, it may be possible to receive extended cargo coverage from your Mexico-based logistics provider.
Many transportation companies, whether they’re freight brokers, 3pls or asset carriers, give shippers the opportunity to increase the coverage level of freight moved within their network.
Though this will increase the cost of moving your freight, on the off-chance that something should happen, holding adequate cargo coverage is crucial to ensuring the smooth fulfillment of your supply chain.
If you are not working directly with the Mexico-based logistics provider (as is seldom the case), your U.S.-based provider should be able to facilitate this transaction.
Self-Insure Using Cross-Border Coverage
Some insurance agencies offer cross-border coverage to shippers moving goods over the U.S.-Mexico border. Purchasing insurance through these third-party companies is another great way to make sure your freight is properly covered.
Feel free to ask your U.S.-based provider which agencies they recommend you receive cross-border coverage through — they likely work closely with some of them.
What Else Should You Keep In Mind When Shipping to Mexico?
If you walk away from this article with anything, we hope it’s this: Never assume that your cargo coverage will follow your freight across the U.S.-Mexico border. As the rules and regulations governing your shipments change between countries, so will your cargo coverages. For this reason, it’s important that you work with a trusted provider to figure out the best course of action for insuring your freight.
At the end of the day, getting your cargo to its destination safely and securely will take a comprehensive understanding of cross-border shipping processes — cargo coverage is only the beginning.
For a more in-depth explanation of U.S.-Mexico transportation processes, check out this article which explains how to ship freight to and from Mexico by truck.
Finally, if you have questions about what shipping to or from a location in Mexico will change things for your business and want to chat more about how ATS can help you get this right, contact us today. We’re always ready to help you move your cross-border freight in any way you need.