Fixed effects panel regression analysis is used to examine the impact of trade clusters on transportation costs along the southern border of the United States. CIF/ FOB ratios are utilized as the transportation cost measures. Grubel-Lloyd and Herfindahl- Hirschman indexes are utilized to identify trade clusters in the sample. Data are assembled for four custom districts (El Paso, Laredo, Nogales, and San Diego) during a 20-year period between 1995 and 2015. Because cross-sectional residual dependence is present, parameter estimation is carried out using Driscoll-Kraay robust standard errors. 9/11 terrorist attack effects are taken into account in the fixed effects model. Empirical results suggest that trade clusters are associated with reduced transportation costs. These results stand in contrast with those obtained for the northern border of the United States, where trade clusters are accompanied by higher transportation costs.