Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: Descartes Datamyne report sheds light on USMCA impact; Germany’s Bosch to invest $100M in Mexico operations; Chinese auto parts maker begins construction of Mexico plant; and Kimberly-Clark de México acquires 65 trucks.

Descartes Datamyne report sheds light on USMCA impact

Implementation of the United States-Mexico-Canada Agreement (USMCA) largely took a back seat to the coronavirus pandemic, semiconductor shortages and other global disruptions in 2020.

A new report from Descartes Datamyne called USMCA Impact and Analysis: Analyzing 2020 Imports & the Changes in North American Trade sheds light on how key imports were affected after the USMCA went into effect — including the automotive industry.

The data can help shippers, manufacturers and transportation providers strategize shipments and plan ahead for capacity, Chris Jones, executive vice president of Descartes, told FreightWaves.

Descartes Datamyne is a global trade intelligence solution that provides a searchable database of import/export trade

“When you start seeing these kinds of numbers, there’s going to be an impact on logistics and capacity,” Jones said. “So if I’m a shipper, I’m in the middle of this [pandemic], but so is everybody else; therefore, I need to maybe look at bringing on other transportation providers just to manage capacity.”

The report’s automotive data shows that during the peak of the pandemic in the early part of 2020, U.S. automotive imports fell more than 10% in total free on board (FOB) value compared to previous years.

FOB describes an export contract under which the buyer makes the transport arrangements and the seller loads the contractual cargo onto a vessel within the contractual shipping window.

As U.S. imports recovered in the second half of 2020, automobile imports from Mexico followed the trend and also began to climb in value. Mexican imports in October saw an 11.8% increase in total FOB value compared to 2019, according to the report. 

“One of the important things I would be looking at, if imports into Mexico are up — even if you’re not in the automotive business, let’s say you’re making air conditioners — it’s going to be the same type of transportation into Mexico,” Jones said. “If air conditioners are up, it’s going to put pressure on shipping capacity. That would be something that as a manufacturer, who may be importing into a maquiladora to do final assembly, that would be something I would want to look at here.”

Other key findings from the report include:

— U.S. imports of auto parts from Mexico increased in year-over-year value during the second half of 2020, with October and December rising 11.6% and 10.8%, respectively.  

— The number of automobiles imported from Mexico has remained on par with previous years while the FOB value of those shipments has increased, an indication of increased costs brought about, in part, from the changes in the USMCA. 

— Despite USMCA requirements for increased automotive parts from North American countries, there was no relative increase in the amount of imports into Mexico from the U.S. and Canada for most of 2020.

The lack of increased imports into Mexico indicates that its domestic manufacturing kept up with demand, according to the report. The exception was the month of December, when the total FOB value for auto parts imported into Mexico from the U.S. and Canada increased 18.4% compared to 2019.

According to FreightWaves SONAR platform, freight volumes in key cross-border markets — Laredo (OTVI.LRD), El Paso (OTVI.ELP) and McAllen (OTVI.MFE), Texas, as well as San Diego, California (OTVI.SAN) — were down throughout the first half of 2020 due to the COVID-19 pandemic, but began to trend upwards from August through December.

United States imports from Mexico rebounded during the second half of 2020 across key U.S.-Mexico border crossings. (Chart: FreightWaves SONAR. To learn more about FreightWaves SONAR, click here.)

“December could be an indication of automakers ramping up production,” Alfred Hille, director of product marketing for Descartes, said. “At the onset of COVID-19, there some reports of auto factories reducing production because of potentially lower demand.”

Hille also said trade flows indicating a slight increase in costs for automobiles caused by policy changes in the USMCA might or might not continue into the future.

Some analysts have predicted that the USMCA’s rules of origin and labor regulations could raise production costs for North American automakers. 

To qualify for tariff-free entry, automakers must use 75% of North American-made parts. Additionally, companies are now required to produce 40% to 45% of their parts from factories paying an average wage of US$16 per hour.

“It might be an indicator of the shift from the North American Free Trade Agreement to USMCA,” Hille said. “I think the key takeaway is that USMCA is relatively new, so time is required for companies to make the shift and take advantage of USMCA.”

Hille said in the long run the automotive industry might see numbers that trend toward “domestic production and maybe costs coming back down.”

“In terms of making the switch from NAFTA to USMCA, it can’t be done overnight,” Hille said. “There are many complex issues that have to be resolved, such as scoping, planning, retooling —  everything from logistics to production.”

Germany’s Bosch to invest $100M in Mexico operations

German automotive supplier Bosch announced it will invest about $100 million to modernize plants in the Mexican cities of San Luis Potosí and Aguascalientes, according to El Economista.

The facility in San Luis Potosí produces gasoline systems and chassis control systems and the plant in Aguascalientes produces brake systems for the automotive industry.

Bosch plans to use the investment to modernize 12 production lines at the two facilities.

Stuttgart, Germany-based Bosch opened its first plant in Mexico in 1966. Today, the company has 12 manufacturing plants across Mexico employing 17,200 people.

Chinese auto parts maker begins construction of Mexico plant

Xinquan Automotive Trim announced it has begun construction of a $6.5 million factory in Aguascalientes, Mexico.

The factory, which will produce interior parts for vehicles destined for the United States, is scheduled to be completed by the end of the year. 

Aguascalientes is located in central Mexico. The factory could employ as many as 400 people, according to a release.

Xinquan Automotive Trim is based in Changzhou, China. The company specializes in auto parts and automotive accessory products.

Kimberly-Clark de México acquires 65 trucks

Kimberly-Clark de México recently added 65 LT International tractors, bringing the company’s total fleet to 283 vehicles.

The LT International tractors were manufactured at the Navistar México truck assembly plant in Escobedo, Mexico. The tractors are equipped with Cummins X15 Euro V engines, as well as technology aimed at lowering levels of noise and pollution emissions.

Mexico City-based Kimberly-Clark de México is a subsidiary of Irving, Texas-based Kimberly-Clark Corp. The company manufactures and distributes consumer and industrial hygiene products — such as diapers, facial tissue and toilet paper.  

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