North American cabotage laws create unnecessary empty mileage by preventing foreign carriers from making limited domestic repositioning moves after crossing the border.
Public attention to supply-chain delays increased during the pandemic. Dry-van rates rose 26.6% over 24 months according to the Stephens TL Rate Index, reflecting scarce equipment and drivers as well as strong demand supported by abundant low-cost cash.
Some freight-network inefficiencies are within a carrier's control. Cabotage is a legal barrier that is not.
What Is Cabotage?
Cabotage is a forbidden freight movement by a foreign carrier between two domestic points. The restriction applies not only to trucking but also to aviation and marine transportation. The Jones Act is a maritime example.
A Canadian carrier entering the United States with Canadian freight may deliver it to one or more U.S. destinations. It cannot then pick up domestic U.S. freight for another U.S. destination. Its next paid movement must return to Canada.
Manufacturers and food producers do not locate facilities around the needs of cross-border trucking networks. Freight bound for Canada also changes by season. Canadian carriers must therefore absorb significant network imbalance and adjust more often than many domestic U.S. carriers.
The restrictions also complicate empty-trailer repositioning unless the driver enters and leaves the United States with the same trailer. Maintaining efficient U.S. trailer pools for Canadian customers becomes extraordinarily difficult.
Similar Rules, Different Treatment in Canada
U.S. carriers entering Canada face the same general prohibition on hauling domestic freight, but they have one important advantage: a paid repositioning movement can occur inside Canada.
A U.S. carrier may deliver in Toronto and then haul a prescheduled domestic load to Montreal when it also has a Montreal pickup for an export load back to the United States.
The exception was intended to improve freight efficiency across Canada's large geography. It also reveals a lack of reciprocal treatment for Canadian carriers operating in the United States.
What Needs To Change?
Supply chains contain countless variables and bottlenecks. A change to one can have broad effects. Future-proofing should include removing easy-to-change legal and administrative barriers rather than concentrating only on moonshots such as autonomous trucks and drones.
The article recommends allowing Canadian carriers one domestic U.S. repositioning move. That change would reduce empty miles and support more efficient cross-border networks.
Revisiting a rule created more than a century ago could ultimately protect the carriers it was intended to shield by improving the efficiency and resilience of the entire North American freight system.