Customs and Infrastructure Challenge International Trade Logistics

By Graeme Stewart

Logistics and infrastructure were two hot topics at the MexicoNOW’s Automotive Industry Summit held in Leon recently and one man who is always in demand when it comes to those two subjects is Agustin Picado, Country Manager of UPS.
Taking a quick break from the Summit to speak to MexicoNow, Mr. Picado said: “We have seen improvements. There is no doubt that the political administration understands the importance of continued improvements in logistics and infrastructure. I think there are capacity issues, road condition issues and there is congestion. Yet at the same time there are more projects everywhere you look, such as the elevated highways in Mexico City seem to be popping up everywhere and one is going to go from Mexico City all the way out to Puebla.”
“My point is that I think there is a tension in the process. It can’t happen fast enough for all of us but if I had to talk about one part of the infrastructure that is very important to UPS and exporters and importers, it is the Customs infrastructure. Trucks are not just about highways, railways and sea ports, it’s also about the Customs system.”
“What is vital for companies exporting and importing is pre clearance, being able to start the process before the stuff shows up.”
On the problems of border freight crossing and Customs, he said: “Three years ago the single window was launched. So that was step one, you have everything digitized and that starts to address potential corruption because you are now making everything visible and it makes it difficult for cash payments to be somewhere in that process.”

“The second thing is, that technology allows you to potentially do your clearance while the goods are in motion. The Mexican government is open to that and we have worked closely with the government on that. UPS Mexico has a system and when that is in place, and the pilot is being run in Laredo, we can now begin to clear things before they get to the Border.”
“The step beyond that, once you have the visibility and analytics, the Big Data, then you can start weeding out the problem shipments. You come in as a traveler and it’s red light or green light. So you are moving shipments in and out of Mexico. But that is 100% random and if you’re a company that’s shipping into Mexico every single day, it’s crazy. I am a traveler coming in and out of Mexico every week and I’m subject to the red light or green light and I don’t even travel with a suitcase.”
“You have to use the single window, you have to use data and analytics to weed out the contraband. Just randomly stopping people, I think you are sub-optimizing the effect and some are getting through without paying the duty and taxes they should be paying.”
“But conditions on the border crossings are getting better. You just have to use the data and analytics more instead of random searches and conditions will continue to improve.”
Mr. Picado referenced a recent survey carried out by UPS entitled “UPS Exports in Mexico: Challenges and Opportunities”, which reveals the challenges and opportunities Mexican companies face when exporting.

He said: “The study is a valuable tool to support companies in growing their businesses. We aim to start in-depth conversations with entrepreneurs about the challenges they face today to achieve their goals and highlight opportunities for improvement. We know that in the supply chain exports are a challenge for most companies; our logistics expertise, technology and infrastructure help companies to overcome those challenges and successfully export.”

The study was developed using surveys in July of 2015 via telephone and online with 474 decision makers, and included in-depth interviews to achieve both qualitative and quantitative results. The findings show the challenges and opportunities in the export process in Mexico, mainly in the automotive, manufacturing and technology industries, which have grown and strengthened in the country.

According to the findings in the study, 90% of the companies stated that there are opportunities to have more efficient exports. The most important aspects of exporting are: 

a) Speed and reliability on deliveries (86%), 

Speed and reliability becomes highly important especially in the automotive, manufacturing and technology industries, due to the fact that most of the companies supply components and parts, which enter into a more complex process. In this part of the supply chain process, there is no room for delays because they could generate economic penalties for these companies. That's why 6 out of 10 companies consider speed of delivery among the main reasons to choose a logistic supplier.

b) The risk of loss or damage to the goods (83%)

The overall condition of export packages is also an important factor to the respondents. Among companies who mentioned having frequent problems with the packing and packaging process 71% indicated having suffered damage to their goods. In addition, 83% of these companies are taking actions to improve customer satisfaction and avoid rejected merchandise due to damage. 

c) Efficient custom clearance process (82%)

Even though five out of 10 enterprises surveyed have an internal export department to coordinate their exports, the companies also emphasized the need for trained staff, with more experience and expertise in foreign trade and logistics. As a consequence, 84% of the surveyed executives mentioned that they look to solve customs procedures issues related to cross border, regulations and clearance by using a contracted logistics third party.

Mr. Picado said exporting companies are more likely to achieve their projected 12-month growth plans by tackling these and other challenges shown in the study, in partnership with a single logistics supplier offering end-to-end solutions, infrastructure, expertise, technology and a wide service portfolio. 

He said: “Exports represent an important opportunity for our customers, so we did the study to provide a detailed outlook of the challenges and opportunities Mexican entrepreneurs face when exporting. We know that, due to the high quality of Mexican products in the automotive, aerospace or technology industries, Mexican companies have a great opportunity to expand into new markets.”