Rising Ocean Freight Rates Highlight the Value of Nearshoring to Mexico Under USMCA

Rising Ocean Freight Rates Highlight the Value of Nearshoring to Mexico Under USMCA‍

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In recent months, global shipping rates have surged dramatically. For instance, container shipping rates from the Far East to the US West Coast have jumped by 29%, reaching $4,468 per forty-foot equivalent unit (FEU), while rates to the East Coast have risen by 21% to $5,584 per FEU​ (Freightos)​​ (Xeneta)​. This escalation in ocean freight costs presents a compelling business case for US companies to consider nearshoring operations to Mexico, leveraging the advantages of the United States-Mexico-Canada Agreement(USMCA).

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Cost Savings and Supply ChainEfficiency

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Nearshoring to Mexico can significantly reduce shipping costs and transit times. The geographical proximity of Mexico to the US means that companies can avoid the exorbitant ocean freight rates and the associated delays. This shift not only cuts transportation expenses but also enhances supply chain efficiency by reducing the lead times required to get products to market.

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Leverage USMCA Benefits

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The USMCA, which replaced NAFTA in2020, offers numerous benefits for companies nearshoring to Mexico. The agreement enhances trade facilitation, reduces tariffs, and strengthens intellectual property protections. These provisions make it easier and more cost-effective for US companies to operate in Mexico, ensuring smoother cross-border trade and better market access.

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Resilience Against Disruptions

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The recent spikes in shipping rates are partly driven by global disruptions, including port congestion and geopolitical tensions​ (Xeneta)​. Nearshoring to Mexico provides a buffer against such disruptions. By relocating production closer to home, companies can mitigate the risks associated with long-haul shipping and maintain more stable and predictable supply chains.

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Sustainability and Consumer Preferences

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Consumers are increasingly demanding sustainable practices from businesses. Nearshoring can reduce the carbon footprint associated with long-distance shipping, aligning operations with sustainability goals. Moreover, producing goods closer to the US market can cater to the growing consumer preference for locally-sourced products.

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Strategic Flexibility

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Establishing operations in Mexico allows companies to remain agile and responsive to market changes. The ability to quickly adapt production and logistics strategies in response to shifts in demand or supply chain disruptions provides a competitive edge in a volatile global market.

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In conclusion, the rising ocean freight rates make a strong business case for US companies to consider nearshoring to Mexico. By taking advantage of the cost savings, efficiency, and strategic benefits offered by the USMCA, companies can enhance their resilience and competitiveness in the global marketplace.

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Kendrick Trade specializes in USMCA qualifications, helping businesses navigate the complexities of trade compliance under this agreement. By ensuring your operations meet the necessary criteria, Kendrick Trade can help you unlock the full potential of nearshoring to Mexico. Visit Kendrick Trade to learn more about our services and how we can support your business in making the most of USMCA benefits.

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Citations:

       • Container Shipping Cost Calculator [2024] - Freightos​     (Freightos)​

       • What is behind the sudden and dramatic increases in ocean freight container shipping rates? - Xeneta​ (Xeneta)

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