New Intermodal Train Between Mexico and Chicago Should Have Limited Impact

Commentary by JP McDaris

BNSF Railway and Ferromex, Mexico’s largest railroad, recently announced the launch of a new intermodal service between Chicago and Silao, Mexico, according to Bloomberg News. The train will connect automakers and manufacturers in the US and Mexico with service weekdays. Trains will be interchanged at El Paso and offer a lower-cost alternative to trucking. Northbound shipments will also be pre-cleared by a customs broker of the customer’s choice with the US Customs Service.

At first glance, the service sounds like a simple way to reduce trucking costs and delays and give US manufacturers access to the fast-growing Bajio manufacturing region in Mexico. Until you look a bit more closely, that is.

For one thing, El Paso is one of the most congested border crossings in the world. That’s one reason why Entrada made the strategic decision some time ago to truck goods through Laredo, where crossing times shorten considerably. Further, crossing times are shortened even more through the use of companies like Entrada, as we have the experience and know-how of having made border crossings almost daily for the past decade or more, as well as a good reputation for thoroughness in our paperwork. Historically, less than one percent of our trucks have been stopped at the Laredo border crossing.

Finally, if El Paso isn’t your most favorable crossing, this service is of no use to you anyway. If you’re shipping to Virginia from Mexico, for example, Laredo is going to be a more cost-effective border city for you to pass through. Assuming that a train crossing will shorten your voyage strikes me as a bit naïve.

Some companies may see a benefit from this service, particularly those based in the Midwest, for example. But for most, there isn’t a lot to be gained here.

Source: Bloomberg


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