Public-Private Partnerships Potential for Arizona-Mexico Border Infrastructure Projects

Final Report

Chapter 6 - Cross Border Commodity Movements between Arizona and Mexico

This section of the report recaps the freight flow analysis from the Arizona Multimodal Freight Analysis Study and also adds additional insight derived from a new dataset which will assist in valuing the commodities that pass through the ports of entry.

6.1 Data Sources and Approach

Two information sources were used for this report: (1) Global Insights Inc.'s TRANSEARCH® commodity movement database for 2005, augmented by (2) the Bureau of Transportation Statistics' (BTS) Transborder Freight Data Report for 2007.

6.2 Value of Exports and Imports through Arizona's Ports-of-Entry

Export and import values for 2007 between the US and Mexico that moved only through Arizona's ports of entry are shown in Exhibit 2. Export value of $6.92 billion represents goods that originated in all US states that are destined to all Mexican states (southbound flows). Import value of $13.80 billion represents goods that originated in all Mexican states destined to all US states (northbound flows). The value of imports were nearly double the value of exports.

Exhibit 2: 2007 Exports and Imports through Arizona's Ports of Entry
(value in 1,000s)

The amounts above are for Arizona ports of entry and do not include values for exports or imports of goods moving between Arizona-Mexico that could have passed through ports of entry in California, New Mexico, or Texas.

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6.3 Exports to Mexico

US Exports to Mexico that Move through Arizona's Ports of Entry

In 2007, exports valued at approximately $6.93 billion destined for Mexico moved through Arizona's seven port of entry locations. Export values represented in Exhibit 3 originated in all US states, not just in Arizona. Exhibit 3 shows the distribution of the export values through the different ports of entry by transportation mode. Nogales handled the largest value of exports with $4.83 billion moved by truck and $1.11 billion moved by rail. The "Other" category represents flows that may have moved by air, pipeline, and other means, or could possibly reflect erroneous data inputs.

Exhibit 3: 2007 Value of US Exports by Mode to Mexico through Arizona's Ports of Entry
(value in 1,000s)

The vast majority of exports moved through Nogales. Exhibit 3 shows Nogales handled over 87% of the value of the exports, San Luis handled 6.2% and Douglas handled 5.8%. Approximately 83% of the goods crossed through the Arizona's ports of entry by truck and 16% were carried by rail. Rail activity was reported only through the Nogales-DeConcini Land Port of Entry.

Exports from US States

The top 10 states receiving imported goods from Mexico through Arizona's ports of entry are shown in Exhibit 4. The top 10 states generated nearly $6.45 billion of exports and represented over 93% of the total value shown in Exhibit 3. The majority of exports originated in the State of Arizona, followed by Michigan and California. Although more distant states may not represent opportunities for Public-Private Partnership initiatives, it is important to understand that the value and volumes of the traffic they generate will pass through Arizona's ports of entry.

In 2007, Arizona's exports to Mexico were $4.38 billion (Exhibit 4, top row, Origin State Total). This amount represented approximately 68% of the $6.45 billion for the top 10 exporting states and over 63% of the $6.92 billion US total. The values of the various commodities exported by Arizona are covered in detail in Exhibit 10.

Exhibit 4: 2007 Value of US Exports to Mexico from Top 10 US Exporting States
(value in 1,000s)

Values of 2007 US exports received by Mexican states that crossed through Arizona's ports of entry are shown in Exhibit 5. Due to its proximity to Arizona, the State of Sonora received the most exports, valued at $5.43 billion, or 78% of the $6.92 billion total. When Sonora* is combined with Sinaloa* and Jalisco*, the two states adjacent to Sonora and Arizona, the total value of exports is $5.89 billion or 85%. These three Mexican States represent a significant trading cluster for Arizona.

Baja California received exports from Arizona valued at only $52 million, or 0.7% of the total. Two other Mexican States, the District Federal and State of Mexico, are a somewhat larger trade cluster that received exports valued at $491 million, or 7% of the total. However their distance from Arizona may reduce their interest in local or regional Public-Private Partnership initiatives.

Exhibit 5: 2007 Value of US Exports to Mexican Destination States
(value in 1,000s)

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6.4 Export Growth

Potential export growth is used to identify the size of future markets to indicate where Public-Private Partnership initiatives may be most successfully directed.

Value of Exports from Arizona Counties to Mexico

The value of exports to Mexico that originated in each Arizona County is shown in Exhibit 6. The base year is 2005. Forecasts are shown for 2010, 2020 and 2030. The counties are sorted in descending order on 2005 values. The 2010 forecast shows statewide growth will be approximately 5%. The forecast indicates export goods will grow by 31% in 2020 over 2010, and by 27% in 2030 over 2020.

BTS's Transborder Freight Report indicated the 2007 export value for Arizona was $4.38 billion (shown in Exhibit 4, top row, Origin State Total). When integrated with TRANSEARCH export amounts, the BTS amount reasonably fits between Arizona's 2005 historic amount of $4.23 billion and the 2010 forecast amount of $4.43 billion. The 2005 and 2010 amounts are shown in the bottom row in Exhibit 6.

County level forecasts detail absolute values and percentage of change. Maricopa County's 2005 exports to Mexico were $2.77 billion; a 65% share of the State's total. They are forecast to grow to a 68% share by 2030. Pima and Pinal County's exports both had an export share at 7.2% in 2005, increasing to 7.3% in 2030. Cochise County's export share in 2005 was at 2.7%, decreasing to 2.4% in 2030. Yuma County's 0.9% export share did not change between 2005 and 2030. Santa Cruz County's 0.2% export share did not change between 2005 and 2030.

Exhibit 6: Growth in Export Value from Arizona Counties to All Mexican States
(value in 1,000s)

See Appendix C for a list of all export commodity type values.

Tonnage of Exports from Arizona Counties to Mexico

Tonnage of exports to Mexico that originated in Arizona's Counties is shown in Exhibit 7. Maricopa, Pima, Pinal, and Yuma are each forecasted to grow at least 30% during the decade from 2010 to 2020, and by a similar amount going out to 2030. Specific tonnage by commodity is detailed in Exhibit 10. This economic expansion will create business opportunities that could expand employment in sectors such as transportation, warehousing and supply chain management.

Exhibit 7: Growth in Export Tonnage from Arizona Counties to All Mexican States
(value in 1,000s)

Arizona Border Counties and Mexican States in the Study Area

Goods Flow from Arizona's Border Counties to Adjacent Mexican States: The border region study area for this report which is shown in Exhibit 8 includes Yuma, Pima, Santa Cruz, and Cochise Counties. They all lie along the Arizona-Mexico border. Maricopa and Pinal Counties, which are within the 100 mile boundary of the international border, are also included in the flow analysis because their large populations produce significant exports and attract a large amount of imports.

Exhibit 8: Arizona Counties in the Study Area

Exhibit 9: Mexican States in the Study

Three Mexican States, shown in Exhibit 9, were included in the analysis group: Sonora, Sinaloa, and Jalisco. These three states are labeled Adjacent Mexican States in this analysis because they lie along Mexican Highways 2 and 15, and the FerroMex Railroad line. The states form a commerce corridor from Guadalajara to Nogales and into Arizona via the border ports of entry. The three states receive approximately 89% of the value of the commodity flows that originate in Arizona. The State of Sonora received over 83% of the Arizona commodity flows. The State of Nayarit which is also situated along this commerce corridor received less than 0.01% of the value of Arizona's exports and, therefore, was not included in the detailed analysis.

• nonferrous metal basic shapes . 51%
• plastic matter or synthetic fibers . 21%
• farm machinery or equipment . 12%
• motor vehicles or equipment . 4%
• steel mill products . 3%

These top five commodities total 93% for the border county group, and over 60% of all commodity flow values from all of Arizona to all of Mexico. The top five of the counties have a relatively similar mix of export commodities. Only Santa Cruz has a unique mix of export commodities.

Exhibit 10: 2010 Value Forecast for Top 5 Export Commodities from Arizona Border Counties to Adjacent Mexican States
(value in $1,000s)

Tonnage for 2010's top 5 commodity exports to the three Adjacent Mexican States from the Arizona Border Counties is shown in Exhibit 11. For each of the Arizona Counties, the commodities are sorted in descending order by tonnage of the commodities. Ranked by tonnage, overall for the six counties, the top commodities are:

• iron ores . 28%
• plastic matter or synthetic fibers . 23%
• field crops . 18%
• nonferrous metal basic shapes . 15%
• steel mill products and household or office furniture tied at . 6%

These top five commodities total almost 96% of this analysis group, and over 70% of all commodities tonnage from Arizona to all of Mexico.

Exhibit 11: 2010 Tonnage Forecast for Top 5 Export Commodities from Arizona Border Counties to Adjacent Mexican States

Truck and Rail Units Required For Export Traffic

The 2010 tonnage amounts are used to forecast the number of truck or rail units required to transport the commodities. A light weight commodity such as electronics or flowers will fill the cubic capacity of a truck trailer before the trailer's cargo weight limitation is reached (typically 40,000 to 45,000 pounds). This is termed "cubing-out." A heavy commodity such as batteries or grains when loaded into a trailer will exceed the trailer's cargo weight limitation and leave unused cubic volume capacity. This is termed "weighting-out."

The number of truck units required to transport the tonnages that move from Arizona's Border Counties to the Adjacent Mexican States is shown in Exhibit 12. Over 78,000 truck units are forecast for 2010 with almost 66,500 units, or 85%, originated in Maricopa County. Exhibit 7 shows that export tonnage for Maricopa County is forecast to grow by 37% from 2010 to 2020 and by 31% from 2020 to 2030. That forecast would generate nearly 120,000 truck units originating in Maricopa County destined for Mexico. Pima County will generate approximately 7,000 truck units in 2010 destined to the three adjacent Mexican states and TRANSEARCH forecasts Pima County's volume to increase to almost 12,000 truck units by 2030.

Sonora is the destination in Mexico for the majority of truck units. There will be over 61,500 truck units destined to Sonora. Over 51,000 of those truck units will originate in Maricopa County and over 6,100 will originate in Pima County. Almost 26,000 of the truck units destined to Sonora will haul plastic or other synthetic commodities and nearly 11,000 will haul field crops and other food commodities.

Exhibit 12: 2010 Truck Unit Forecast for Top 5 Export Commodities from Arizona Border Counties to Adjacent Mexican States

The number of rail units is forecast in a similar manner as truck units. The forecast for rail units needed to transport Arizona's export tonnage to Mexico is shown in Exhibit 13. Approximately 68% of the rail units needed to carry export tonnage will be used for field crops.

Exhibit 13: 2010 Rail Unit Forecast for Top Export Commodities from Arizona Border Counties to Adjacent Mexican States

Export Commodity Values through Ports of Entry

The value of export commodities from all US States destined for all Mexican States moving through Arizona's ports of entry is shown in Exhibit 14. These commodities were filtered out of the BTS Transborder Freight Report that uses The North American Industry Classification System (NAICS). The TRANSEARCH 2005 database used the Standard Transportation Commodity Code (STCC). Although the two commodity description codes are similar, there is not an exact match for all commodities. Thus, Exhibit 14 is used for a magnitude of scale comparison for all commodities that pass through Arizona's ports of entry.

Exhibit 14: 2007 Value of Top 10 Commodities Exported to Mexico through Arizona's Ports of Entry (value in $1,000s)

See Appendix E for a list of all export commodities through Arizona's ports of entry.

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6.5 Imports from Mexico

US Imports from Mexico that Move through Arizona's Ports of Entry

In 2007, US imports from all Mexican States that moved through Arizona's seven ports of entry were valued at $13.80 billion. Import values shown in Exhibit 15 indicate by mode of transportation their distribution through the different ports of entry. Nogales handled the largest value of imports with $8.42 billion moved by truck and $3.72 billion moved by rail. The "Other" category represents flows that may have moved by air, pipeline, and other means or could possibly reflect erroneous data inputs.

Exhibit 15: Value of Imports from Mexico by Mode through Arizona's Ports of Entry
(value in 1,000s)

The vast majority of the imports moved through Nogales. Exhibit 15 shows Nogales handled 88% of the value of the imports, San Luis handled 5.1%, and Douglas handled 6.4%. Approximately 73% of the goods crossed through Arizona's ports of entry via truck and 27% were carried by rail. The only rail activity reported was through the Nogales-DeConcini Port of Entry.

Imports to US States

The top 10 states receiving imports from Mexico through Arizona's ports of entry are shown in Exhibit 16. These top 10 states generated nearly $12.66 billion of exports and represented over 92% of the $13.80 billion total value shown in Exhibit 15. The majority of the imports were destined for the State of Arizona, followed by Michigan and California.

In 2007, Arizona's imports from Mexico were $4.70 billion (top row, Exhibit 16, Origin State Total). Arizona represented approximately 37% of the $12.66 billion for the top 10 importing states and over 34% of the $13.80 billion import total for the US. Goods from Mexico to other US states represent 66% of the total value of the imports. Over 54% of the goods imported from Mexico through Arizona's ports of entry enter the national highway grid and head toward the Midwest and other eastern states. Additional information on commodity flows passing through Arizona can be found in ADOT's Arizona Multimodal Freight Analysis Study, Technical Memorandum #1.

The San Luis II Port of Entry will soon attract a portion of the imports that now pass through the Nogales Ports of Entry. A new highway, expected to open in 2010, will parallel the Sonora coastline connecting Guaymas to San Luis Rio Colorado due south of Yuma, AZ. Trucks that now use Mexico Highway 15 to carry freight from/through Guaymas to the border crossing at Nogales and then use I-19, I-10 and I-8 to deliver freight in western Arizona, California or Nevada will be able to use the new, shorter and safer alternative route. The 5.2% share that San Luis currently handles will increase as drivers adopt the new route.

The values of the various commodities imported from Mexico are detailed in Exhibit 19.

Exhibit 16: Value of Imports from Mexico through Arizona's Ports of Entry to the Top 10 US Destination States
(value in 1,000s)

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6.6 Import Growth

Value of Imports to Arizona from All Mexican States

The value of commodities that were imported from all of the Mexican States to all Arizona Counties is shown in Exhibit 17. The Mexico States are sorted on descending value of Arizona's imports. Forecasts for 2010, 2020 and 2030 show there will be significant increases in the value of commerce originating in Mexico destined for Arizona.

In Exhibit 16 above, BTS's Transborder Freight Report indicated the 2007 import value for Arizona was $4.70 billion (top row, Destination State Total). When compared to TRANSEARCH amounts, the BTS amount fits between Arizona's 2005 historic amount of $3.77 billion and the 2010 forecast amount of $4.99 billion. The 2005 and 2010 amounts are shown in the bottom row in Exhibit 17. Forecasts at the Mexican State level show the absolute values and percentage of change. The value of 2005 imports received by Arizona Counties from Sonora was $944 million, a 25% share of total Mexican imports. Sonora's value is forecast to grow to 27% by 2020, and to 30% by 2030. Clearly, Sonora will increasingly become the major source of commodities imported by Arizona. Import share from Nuevo Leon to Arizona was at 11.8% in 2005 and decreasing to 10.4% in 2030. Import share from Jalisco to Arizona was at 4.9% in 2005 decreasing to 4.8% in 2030. Import share from Sinaloa to Arizona was at 3.4% in 2005 increasing to 4.9% in 2030.

The value of 2005 imports received by Arizona from Baja California Norte and Baja California Sur was only $40.2 million, or approximately 1% of Mexico's total to Arizona. An unknown percentage of those imports may have crossed the border at Mexicali to California and used US highways to reach Arizona, further reducing the amount Baja's total that crossed through the port of entry at San Luis.

Exhibit 17: Import Value Growth from All Mexican States to Arizona Counties
(value in 1,000s)

See Appendix F for a list of all import commodity type values.

The tonnage of imports from all Mexican States received by Arizona's Counties is shown in Exhibit 18. For all Mexican States, 2005 tonnage to Arizona was 2.42 million tons. By 2020 total tonnage is forecast to grow by 39%, and from 2020 to 2030 it is forecast to grow another 22%. Import tonnage to Arizona Counties from Sonora 2005 tonnage is 25% of Mexico's total. It is forecast to grow 48% in 2020 over 2010, and grow another 30% in 2030 over 2020. Specific tonnage by commodity is detailed in Exhibit 18.

Exhibit 18: Import Tonnage Growth from All Mexican States to Arizona Counties

See Appendix G for a list of all import commodity type tonnages.

Top Commodities to Arizona's Border Counties from Adjacent Mexican States

The 2010 import value to Arizona's Border Counties from the three Adjacent Mexican States is $1.70 billion or 34.1% of 2010's $4.99 billion of total import value destined to Arizona's Border Counties shown in the bottom row in Exhibit 17. The total for the three states is forecast to grow to $2.49 billion, or 35.8%, in 2020, and $3.25 billion, or 37.9%, in 2030. The 2010 top 5 commodity flow values from Sonora, Sinaloa and Jalisco to the Arizona Border Counties are shown in Exhibit 19. For each Mexican State, the commodities are sorted in descending order by value of commodity. Ranked by value, overall for the three states, the top commodities imported to Arizona's Border Counties are:

• engines or turbines . $899 million or 19%
• fresh vegetables . $224 million or 4.8%
• nonferrous primary smelter products . $51 million or 1.1%

Exhibit 19: 2010 Value Forecast for Top 5 Import Commodities from Adjacent Mexican States to Arizona Border Counties
(value in 1,000s)

Tonnage for 2010's top 5 commodity imports from the three adjacent Mexican States to Arizona's Border Counties is shown in Exhibit 20. For each of the Mexican States, the commodities are sorted in descending order by tonnage of the commodities. Ranked by tonnage, overall for the three states, the top commodities are:

• engines or turbines 502,069 tons or 15.8%
• fresh vegetables 125,654 tons or 3.9%
• nonferrous primary smelter products 121,462 tons or 3.8%

Exhibit 20: 2010 Tonnage Forecast for Top 5 Export Commodities from Adjacent Mexican States to Arizona Border Counties

Truck and Rail Units Required For Import Traffic

The number of truck units required to transport the tonnages from the three Adjacent Mexican States to Arizona's Border Counties is shown in Exhibit 21. In 2010, for the three Adjacent Mexican States to Arizona Counties, 46,300 truck units will be required in 2010. Using tonnage forecast growth rates from Exhibit 18 of 39% in 2020 and 22% in 2030, this truck unit forecast could rise to approximately 76,000 by 2030. Sonora alone will originate almost 37,200 truck units that will terminate in Arizona Counties. The number of truck units destined to Arizona Counties from Sonora could rise to over 70,000 by 2030.

Maricopa County is the destination for the majority of truck units. There will be over 42,000 truck units destined to Maricopa. Almost 31,000 will haul engines or turbines and approximately 4,900 will haul fresh vegetables.

Exhibit 21: 2010 Truck Unit Forecast for Top 5 Export Commodities from Adjacent Mexican States to Arizona Border Counties

The forecast for rail units required to transport import tonnage destined to Arizona's Counties from the three Mexican Adjacent States is shown in Exhibit 22. Approximately 78% of the rail units required to carry export tonnage will be used for nonferrous primary smelter products and 8.5% for nonferrous metal basic shapes.

Exhibit 22: 2010 Rail Unit Forecast for Top Import Commodities to Arizona Border Counties from Adjacent Mexican States

Import Commodity Values through Ports of Entry

The value of the top 10 import commodities from all of the Mexican States destined to all US States moving through Arizona's ports of entry is shown in Exhibit 23. These commodities were filtered out of the BTS Transborder Freight Report which uses the NAICS Code compared to the STCC that is used in the TRANSEARCH 2005 database. Although the two codes sets are similar in description there is not an exact match for all of the commodities. Thus, Exhibit 23 is used more for a magnitude of scale based on all of the commodities that pass through the ports of entry. There is clear indication that Nogales is primary port of entry for handling vehicle parts, electrical machinery and food products from Mexico. Douglas Port of Entry handles copper products, vehicle parts and machinery. San Luis Port of Entry handles electrical machinery and edible fruits and nuts.

Exhibit 23: Value of Top 10 Commodities Imported from Mexico through Arizona's Ports of Entry
(value in 1,000s)

See Appendix H for a list of all import commodities through Arizona's ports of entry.

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