Economic fallout worsened Thursday even as Texas Gov. Greg Abbott, R, moved incrementally to roll back new inspection rules for commercial trucks entering from Mexico, with some companies saying they aren’t able to fulfill orders because trucks are stuck in multi-mile backups at a number of entry points.
Little Bear Produce is a Texas-based grower-packer-shipper, farming 6,000 acres in Texas and supplementing its inventory with Mexican-grown produce so it can be a year-round supplier to major grocery chains such as Wegmans, H-E-B, Publix, Albertsons and Kroger.
Bret Erickson, senior vice president of business affairs for Little Bear, said the added inspections have cost it “hundreds of thousands of dollars” already, not to mention the reduced paychecks for many loaders who have had no work as trucks fail to show up.
“This has directly impacted our business since late last week,” Erickson said. “We would typically be receiving 10 to 12 loads of watermelon per day from Mexico, as well as different kinds of herbs and greens. Since the middle of last week, we have received zero of those shipments of watermelon.”
That means the company did not meet its business obligations with major retailers, which have in turn had to find Mexican melons from farther away, such as from Arizona. Added distance means added fuel costs.
“We all know the cost of fuel these days is outrageous. Ultimately, it means consumers will bear the brunt of that increased cost,” Erickson said, adding that reduced supply overall also drives up prices.
“As a Texas business, we were really confused and disappointed by this decision by Gov. Abbott, in a state that touts itself as business-friendly,” he said. “This was a direct hit to Texas businesses, businesses that are already facing increasing costs in fuel, fertilizer, labor and packaging.”
In a sign of progress, Abbott held a news conference Wednesday with the governor of Nuevo León, Mexico, and said they had hashed out an agreement to lift the onerous additional inspections in that one area. And early Thursday evening, he followed with a news conference with the governor of Chihuahua to cement a similar deal. His intent, he said, was to lift cumbersome border inspections as the governor of each Mexican state that exports products through Texas ports of entry agreed to heightened security terms.
Abbott said that the governor of Tamaulipas had already contacted his office and that he would soon be meeting with the governor of Coahuila.
“I look forward to having the opportunity to meet with the governor from Tamaulipas, which may occur as soon as tomorrow, where we will be working to achieve similar results,” Abbott said. “Until those agreements can be achieved, however, the Texas Department of Public Safety will continue to thoroughly inspect all commercial vehicles entering into the United States and into the state of Texas from every Mexican state except Nuevo León and Chihuahua.”
Instituted in response to the Biden administration’s announcement that a pandemic-era impediment to immigration would be discontinued, Abbott’s state inspections caused thousands of trucks to back up for as much as eight miles at ports of entry. Trucks containing household goods, car parts and other shelf-stable goods have been delayed, tangling up supply chains that involve hundreds of thousands of jobs on both sides of the border. Multiday backups could lead much of the fruit and vegetable cargo to spoil, rendering it worthless.
Abbott, a two-term Republican up for reelection in November, has said he wants Mexican governors to reach individual agreements with him to increase safety inspection of trucks crossing the border.
“This is sending a message to both the president and Congress: Texas is tired of being the unloading dock for illegal immigrants crossing the border. The new unloading dock is going to be Washington, D.C.,” Abbott said Thursday in Chihuahua.
Many are not sanguine about what might come next.
“Yesterday’s circus with Gov. Abbott was just that: all show,” said Matt Mandel, vice president of finance for Sun Fed, a grower-shipper primarily of Mexican-grown fruits and vegetables. “The protests on the bridges ended and traffic started flowing again, albeit very slowly. It remains to be seen if the continued inspections create another scenario where the truckers refuse to work again.”
A statement from multiple Mexican agencies, including the Business Coordinating Council and the Confederation of Industrial Chambers of Mexico, pegs the losses at $8 million per day.
Dante Galeazzi, chief executive of the Texas International Produce Association, said consumers will start seeing empty store shelves this weekend in the fresh fruits and vegetables departments.
“Further, it will take at least a week if not longer after a resolution is in place before the supply chain can correct itself,” Galeazzi said. “That means outages will persist even beyond the time a solution is implemented.”
Losses associated with the remaining port of entry logjams depend on whether Abbott makes agreements with the other Mexican governors, said Lance Jungmeyer, president of the Fresh Produce Association of the Americas. The northeastern Mexican state of Tamaulipas is key, he said, because a majority of produce crosses the Rio Grande there via the Pharr-Reynosa International Bridge into Texas.
Jungmeyer said that as of the opening of Thursday’s business at Texas ports of entry, things still looked rough and that there were reports of “very slow traffic.”
Mexico’s National Chamber of Freight Transport, known as CANACAR, which represents Mexican trucking companies, said its members are losing millions of dollars per day because of delays at the border.
The chamber said the loss comes from a mix of noncompliance with contracts, perishable goods rotting in trucks, and materials that do not arrive in time for manufacture.
The most affected companies are those working with perishable goods and in automotive production, the chamber said.
“We are talking about 15 to 30 hours of waiting to cross. There are products that cannot be stopped for so long, that need a controlled temperature with an air conditioner that runs on diesel,” said a spokesman for the chamber who said he was not authorized to be quoted by name.
“But the most important thing is the inhumane conditions of the drivers and the issue of insecurity,” the spokesman said. “We already saw today the burned trailers. . . . The line of trucks grows and grows, and you are there, without being able to move, at 40 degrees [Celsius] without bathing, without resting, without security.”
Abbott’s border inspections come at a time when U.S. supply chains are already overwhelmed. A surge in demand from customers—the result of a surprisingly fast recovery from the devastating coronavirus recession of 2020—caught businesses by surprise and led to bottlenecks at factories, ports and freight yards. It’s also pushed up prices, contributing to the highest inflation in 40 years.
COVID-related factory shutdowns in China and the rocketing cost of shipping goods across the Pacific Ocean have many companies looking to Mexico, where there’s no ocean to cross and there’s relief from the political and trade disputes between Washington and Beijing.
“A lot of companies, right now, they’re looking at Mexico as a way to bypass ocean dependency,’’ said Bindiya Vakil, CEO of the supply chain consultancy Resilnc. “If I’m one of those companies, I’m looking at this new regulation on the Texas border and I’m really concerned because this means additional delays, and that was supposed to be my solution—to go to Mexico and avoid the ocean altogether.’’
The U.S.-Mexico border is crucial to the U.S. economy. The United States last year imported $390.7 billion worth of goods from Mexico, second only to China.
But as the inspections taper off in Texas, Abbott says he will continue putting migrants on buses and sending them to Washington, D.C., calling it a message to President Joe Biden. “If he’s not going to come to the border, we’re going to take the border to him,” Abbott said.
U.S. Customs and Border Protections Commissioner Chris Magnus said Thursday that Abbott was moving migrants without “adequately coordinating” with the federal government. The first bus arrived Wednesday, and Abbott said more are on the way.