High Court Ends Mexican Truck Ban

Washington

Mexican trucks may soon be rolling on America's highways afterthe United States Supreme Court struck down the last legal barrierpreventing them from crossing the border.

In a unanimous decision, the high court overturned a NinthCircuit Court of Appeals ruling which said that the Federal MotorCarrier Safety Administration must conduct an environmental impactstudy before it could allow Mexican trucks to use Americanhighways.

The Supreme Court ruled that FMCSA lacks the discretion toprevent cross-border operations of Mexican trucks and that nothingin the nation's environmental laws requires FMCSA to conduct anenvironmental impact study.

The issue is important to insurance companies due to ongoingconcerns over the safety of Mexican trucks.

David Snyder, vice president and assistant general counsel withthe Washington-based American Insurance Association, said he is notsurprised by the Supreme Court's decision in the case ofDepartment of Transportation v. Public Citizen. Theimportant thing, Mr. Snyder said, is to assure that underwriterswill have all the information they need to provide insurance andthat safety efforts are maintained at a very high level.

Dave Golden, director of commercial lines for the Des Plaines,Ill.-based Property Casualty Insurers Association of America, addedthat PCI's concerns always revolved around safety.

The FMCSA, he said, has created rules and an infrastructuredesigned to assure that Mexican trucks are held to the same levelof safety as American trucks. Now, Mr. Golden said, it is up toFMCSA to police the system.

The issue centers on a long-standing moratorium that preventedMexican trucks from operating in the United States. After the NorthAmerican Free Trade Agreement (NAFTA) took effect on Jan. 1, 1994,the government of Mexico challenged the moratorium under NAFTA'sdispute resolution process.

In February of 2001, an international arbitration paneldetermined that the “blanket refusal” of the United States toapprove motor carrier applications from Mexico violated NAFTA.

President Bush then said he would lift the moratorium afterFMCSA promulgated safety regulations for Mexican trucks andestablished a safety inspection regime. FMCSA issued theregulations and President Bush ended the moratorium in November of2002.

However, the Washington-based public interest group, PublicCitizen, filed a lawsuit challenging the lifting of the moratorium,charging that under the nation's environment laws, FMCSA was firstrequired to conduct an environmental impact study of emissions fromMexican trucks that will be entering the United States.

The Ninth Circuit Court of Appeals agreed and called for a fullenvironmental impact study before ending the moratorium.

But a unanimous Supreme Court ruled that FMCSA does not have theauthority to countermand the President's order lifting themoratorium, nor does it have authority to categorically excludeMexican trucks from operating in the United States.

For the insurance industry, the next issue is reopening NAFTA toallow mutual recognition of policies, Mr. Snyder said. Currently,Mr. Snyder noted, insurance policies written in the United Statesare not recognized in Mexico and insurance policies written inMexico are not recognized in the United States.

“It is ironic that NAFTA allows an 80,000 pound truck loadedwith hazardous chemicals to cross the border, but not a two ounceinsurance policy,” he said.

Mr. Golden said the current system is burdensome in that itrequires multiple insurance policies. If a U.S. insurer, he said,wants to cover a U.S. truck in Mexico, it must have a fronting orsimilar type of arrangement with a Mexican insurance company.

It is important, Mr. Golden said, to simplify the process sothat more insurance companies will be able to participate in thismarket if they so choose.

Reproduced from National Underwriter Edition, June 11, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.