Logistics Term Paper - Essay Example

However, to realize these benefits, shippers must meet the growing task of dealing with customs and compliance issues surrounding their participation in free-trade agreements. Promoting key relationships with shipping and intermediary partners is a necessary strategy in cross-border transportation between the US and Mexico. As the growth of NAFTA cross-border traffic regulations for Mexico continues to drive trade growth between the two countries, compliance and security issues continue to challenge transportation and logistics providers as well as shippers (Villarreal 67).

There are considerable impediments for the efficient good movement between the two countries. Major hurdles derive from transaction costs which reduce and often eliminate the benefits gained from the removal of tariffs resulting from NAFTA. Transaction costs in this paper refers to cost not linked with direct transportation expenses like freight rates, but those that emerge from complying with security, safety and customs procedures, delays at border crossings and those linked with extra handling of goods as a result of lack of a harmonized transportation system (Lederman, Maloney, and Serven 112).

These costs increases prices for traded goods and affect the demand for goods manufactured in these countries. Transaction costs arise from regulatory and infrastructure issue that add costs to the movement of goods. According to Frittelli (36) their quantifying is hard given the wide range of factors that affect trade and transportation in North America. A recent study estimated the total delay costs along the U.S.-Mexico border, at nearly $80 million (Tsui 9). It is hard to distinguish costs as a result border security regulations from those that are due to poor infrastructure or lack of harmonization.

Particularly, as security regulations continue to evolve as emerging