ARIZONA DEPARTMENT OF TRANSPORTATION MOTOR VEHICLE DIVISION Motor Carrier and Tax Services

1. International Cross Border Demonstration Project ARIZONA DEPARTMENT OF TRANSPORTATION MOTOR VEHICLE DIVISION Motor Carrier and Tax Services SEPTEMBER 17, 2008 Mesa, ARIZONA

2. FMCSA initiated the project on September 6, 2007. 100 Mexican domiciled motor carriers to operate throughout the U.S. for one year. One base jurisdiction (Texas, New Mexico, Arizona or California). 100 U.S. domiciled motor carriers will be granted reciprocal rights to operate in Mexico. Brief Information about the Program…

3. Pre-Authorization Safety Audit (PASA) required under FMCSA regulations. A Mexican Conviction Database is established. No HAZMAT and passenger carriers will be allowed to travel interstate within the U.S. Carriers must provide proof of insurance from a U.S. licensed firm with a $750,000 minimum bodily injury and property damage liability. Important points to remember…

4. Every vehicle entering the U.S. must have a valid CVSA decal and must pass an in-depth North American Standard Truck Inspection (every 90 days). Verify the existence of Mexican controlled substances and alcohol testing programs consistent with U.S. Federal regulations. Verify a system of compliance containing hours of service rules, recordkeeping and retention.

5. A Global Positioning System (GPS) device will be placed on all U.S. and Mexican trucks that are participating in the project, to track the position of the truck at all times.

6. FMCSA will… • Verify that each driver under the demonstration program: • a. Has a valid Licencia Federal de Conductor through the Mexican Drivers License Information System. • b. Check the Commercial Driver’s License Information System (CDLIS) for violations, suspensions, etc. • Mexican carriers and drivers will have to comply with all applicable U.S. laws and regulations, included but not limited to: • Cabotage Limitations - U.S. federal rules limits the MX carriers travel. It prohibits a load to be picked up in the U.S. for delivery to another point in the U.S. • FMCSA will then issue the appropriate operating authority

7. Update as of July 16, 2008… Mexico - U.S. Operation • 27 Mexican motor carriers approved • 107 vehicles have been granted operating authority to travel into the U.S. beyond the commercial zone. • Most of these trips had destinations within the commercial border zones.

8. These carriers have made 9,983 trips into the United States. • 1,272 long haul trips had destinations beyond the commercial border zone. 9,983 1,272 Source: FMCSA data

9. Update as of July 16, 2008… • FMCSA has notified an additional 30 Mexico-domiciled motor carriers to have successfully passed a Pre-Authorization Safety Audit. • Proof of financial responsibility will have to be filed, prior to issuing Operating Authority.   • This will bring the total number of approved carriers to 57

10. Update as of July 16, 2008… U.S. – Mexico Operation • 10 U.S. motor carriers traveling to Mexico • 55 vehicles have been granted reciprocity to travel into Mexico. • These carriers have made 2,245 trips across the Mexican border • The project has shown that U.S. and Mexican carriers can engage in cross-border trucking operations in compliance with applicable laws and with no compromise to public safety or security. • In fact, Mexican trucks and drivers have established compliance rates equal or better to those of U.S. trucks and drivers.

11. Facts of the Demonstration Program… • Participation turnout is smaller than expected. • Uncertainties concerning the length and viability of the demonstration project may have deterred a significant number of both MX and US carriers. 540 100 107 27 Source: FMCSA data

12. Facts of the Demonstration Program… • FMCSA officials believe that Mexican carriers are not participating in the program because they are reluctant to incur substantial costs relating their expanded operations, especially when: • Obtaining Financial Responsibility • Developing a customer base for long-haul operations, with the uncertainties concerning the project’s longevity

13. Facts of the Demonstration Program… • U.S.carriers have expressed concern of: • The high cost of maintaining an official legal representative in Mexico along with; • The belief that a minimum of two years is needed to develop sustainable business relationships with Mexican shippers.

14. Demonstration Program in Arizona • On June 10, 2008, FMCSA granted provisional operating authority to Manuel Encinas Teran based out of Nogales, Sonora-Mexico • One truck, traveling from Mexico to Tucson, Arizona

15. AZ requirements for IRP and IFTA for Mexican Motor Carriers • USDOT Number-FMCSA. • Operating Authority-FMCSA. • Applications for IRP Registration and IFTA licensing – ADOT. • 2290 Federal Heavy Vehicle Use Tax –IRS. • Articles of Incorporation – Arizona Corporation Commission

16. AZ requirements for IRP and IFTA for Mexican Motor Carriers • Vehicle Ownership documentation. • Cash Bond. • Base Jurisdiction for IFTA and IRP– must be the jurisdiction that the carrier will expect to travel the most miles in the 1st year of operation. • Must maintain a record keeping system for audit purposes.

17. In anticipation of the Demonstration Program, we have… • Modification of computer system (VISTA, TARGATS, T&R). • Translated to Spanish all our: • Motor Carrier forms and applications • IRP Manual • IFTA Manual • Contacted the participating carrier. • Developed informational literature for motor carriers such as: • Brochures • Quick Reference IFTA and IRP booklet • Presentation for training/instructions on IFTA and IRP

19. Latest update… • As of August 4, 2008, the Demonstration Project was extended for two additional years as permitted under U.S. Law. • The extension will ensure that the demonstration project can be reviewed and evaluated on the basis of more comprehensive data. • The extension will enable FMCSA to collect and analyze a larger volume of safety and operational data, which is the fundamental goal of the demonstration project. • FMCSA believes an extension will provide non-participating motor carriers in both Mexico and the United States, added incentives to join the project, knowing that their investment in long-haul foreign operations will have more time to mature and become profitable

20. THANK YOU