An earlier article (see Holland & Knight's alert, "NAFTA Discussions May Alter New Rule on Lease of Equipment by Mexican Carriers," Jan. 13, 2017), discussed the Trump Administration's expected renegotiation of, and potential withdrawal from, the North American Free Trade Agreement (NAFTA). Against that backdrop, the potential impact of those renegotiations on the new rule of the Federal Motor Carrier Safety Administration (FMCSA) permitting Mexico-domiciled motor carriers to lease their equipment to U.S. motor carriers (the Mexican Carrier Rule) was discussed. Incidentally, the Mexican Carrier Rule became effective on Nov. 22, 2016, shortly after the election, following an earlier pilot program. Many believe the pilot program and rule resulted, at least in part, to avoid the imposition of retaliatory tariffs exceeding $2 billion on numerous products. Mexico imposed the tariffs based upon its contention that the U.S. was discriminating against Mexican trucks in violation of NAFTA's terms.
Since the inauguration, President Donald Trump's stance and rhetoric on NAFTA have softened somewhat. While the Trump Administration clearly intends to negotiate with Mexico and Canada, and will likely do so under the threat of U.S. withdrawal from NAFTA, the recent tone of the comments from the administration appear to be pointing toward a renegotiation that would maintain strong trade relationships with Mexico and Canada.
In the meantime, the administration does not appear to have retreated, yet at least, from the Mexican-Carrier Rule. While in many other instances, the Trump Administration has openly changed positions in lawsuits initiated by or against the Obama Administration, in a recent oral argument before the U.S. Court of Appeals for the Ninth Circuit, the U.S. Department of Transportation (DOT) continued to advocate in favor of the Mexican-Carrier Rule. The position of the current administration was unequivocally stated on the record in an appeal by the Teamsters, joined in by intervenor Owner-Operator Independent Drivers Association (OOIDA). In the appeal, the Teamsters and OOIDA argued that the DOT's acceptance of applications from Mexico-domiciled motor carriers for permanent operating authority to haul freight in the U.S. was improper and based on inadequate study and data.
At a March 15, 2017, oral argument in response to direct questions from the Ninth Circuit judges deciding the case, DOT's legal counsel confirmed that the agency was still accepting and granting new applications from Mexican motor carriers and stated that "nothing has changed" as a result of the change in administrations.
Nonetheless, it is possible that the Mexico-Carrier Rule could be invalidated, in whole or in part, by the Ninth Circuit. In addition, the rule is likewise the subject of a collateral attack by Rep. Peter DeFazio (D-Ore.). On Feb. 16, 2017, Rep. DeFazio introduced the "Blueprint for America's New Trade Policy," which DeFazio described as principles for renegotiating NAFTA. The resolution calls for NAFTA's replacement, which, among other changes, "should require all foreign service providers' vehicles and drivers entering the United States to meet all United States highway safety and environmental standards before being granted access to and use of United States distribution and transportation systems."
So, while NAFTA continues to be a source of headlines and discussions, the Mexican-Carrier Rule remains in place but will also need to weather independent attacks.