A new administration in the White House. A shifting balance of power in Congress. An ongoing pandemic causing continued supply chain complications.
From a transportation policy perspective, 2021 had it all.
Amid all of these disruptions, some slow but significant progress has been made on new legislation and regulations with major implications for the transportation industry.
Shippers and carriers alike should familiarize themselves with these recent and forthcoming regulations and policy priorities to get ready for 2022.
- California AB5
- Department of Supply Chain
- FMCSA Drug & Alcohol Clearinghouse
- Watch the Webinar
Pro tip: Rusty on your civics? Take a few minutes to brush up on the basics of government regulations and how they impact transportation.
After five grueling months of debate, the Infrastructure Investment and Jobs Act was finally passed by both houses of Congress on November 5, 2021 and presented to President Joe Biden for signature on November 8.
While the bill is the first major policy achievement for the Biden Administration, the need for a massive infrastructure overhaul has been a bipartisan priority for some time.
Infrastructure and jobs formed a key plank of the Trump platform for the 2016 election, but his Administration was unable to pass a major infrastructure bill during his presidency.
Why has it been a challenge to pass the infrastructure bill?
While infrastructure spending is a widely popular initiative on both sides of the aisle, the deliberations for this bill were painstaking. Why was that?
It started with a debate over what counts as infrastructure. We can sort the types of structures and systems that different people want to call infrastructure into two groups:
- “Hard” infrastructure: a more conventional understanding of the term, generally physical in nature. Roads, bridges, airports, seaports, railways, drinking water systems and telecommunications.
- “Soft” infrastructure: an argument that certain social programs are so important to the maintenance of the nation that they are infrastructural in nature. Includes things like schools and paid family/medical leave.
The price tag for the initial version of the bill that included House Democrats’ full wish list of items — both types of infrastructure — was $3.5 trillion over 10 years.
The bill as it was eventually passed was pared back to $1.2 trillion with a focus almost exclusively on “hard” infrastructure.
Key Takeaway: The infrastructure bill focuses on “hard” infrastructure: roads, bridges, airports, seaports, railways, drinking water systems and telecommunications.
What’s in the final infrastructure bill?
The White House Briefing Room identifies some major components of the bill that are of particular interest to the transportation industry:
- $110 billion of new funds for roads and bridges, with a focus on improving safety and strengthening communities in preparation for the impact of climate change
- $66 billion for passenger and freight rail aimed at addressing needed maintenance and corridor enhancement, particularly in the Northeast
- $7.5 billion to build out a national network of electric vehicle chargers at a time when motor carriers are keen to incorporate the technology into their fleets
- $25 billion for airports and $17 billion for seaports, both intended to complete necessary maintenance and expansion to help solve some of the present congestion issues
The record level of funding for roads, bridges and transit terminals should help carriers reduce maintenance costs and improve the safety and quality of life for their workforce.
This in turn will hopefully spur capacity improvements that can increase efficiency and lower costs for shippers.
While the most significant legal challenge to California’s new worker classification law seems to have hit a roadblock at the U.S. District Court level, the drama surrounding the law’s application to truckers isn’t over yet.
What is California AB5?
Originating from a California Supreme Court decision about employee classification, Assembly Bill 5 (AB 5) is a California state law that redefines and limits the way businesses classify workers as independent contractors (as opposed to employees).
The legislature passed the law — which had significant support from labor groups and unions — in response to worker classifications practices from many technology companies in the gig economy.
As it relates to trucking, this law could make it more difficult for California-based motor carriers to utilize independent contractors (i.e. owner-operators).
Is AB5 in effect today?
AB5 went into effect on January 1, 2020 but it did not impact the trucking industry at that time.
That’s because the previous day, the U.S. District Court for the Southern District of California granted a restraining order in response to a lawsuit by the California Truckers Association (CTA) that prevented the law from being applied to motor carriers.
In May 2021, the District Court eventually ruled against the CTA and reversed the restraining order. The CTA subsequently petitioned the U.S. Supreme Court to hear the case, but the high court has not decided whether they will or not.
Will Congress get involved?
Congress will not get involved in this issue in the short term.
How will AB5 impact shippers and carriers?
The long-term fallout from the California AB 5 could be significant.
The expansion of these types of legislative statutes (pro-employee/anti-independent contractor) could indeed have a material impact on trucking rates and capacity in the long term.
By limiting how and when independent contractors can be used, carriers — particularly smaller ones — will face increased operating costs from wages, benefits, insurance and more.
If these laws gain momentum in several states, they will also impact larger carriers that hire drivers for short durations or during peak shipping periods.
Any increased costs to carriers big and small would undoubtedly be passed along to shippers in the long term.
In current version of budget reconciliation being debated in Congress, one particular provision stands out to transportation professionals.
There are currently plans to set aside funding for the establishment of a “critical supply chain resiliency program” within the Department of Commerce. If this program gets funded, it could go a long way toward strengthening the entire transportation industry to withstand future disruptions.
What is budget reconciliation?
This is the process in which congress approves federal spending for the coming year. During this process, money is allocated to the different departments and programs with stipulations placed on how it will be used.
Significantly, budget reconciliation can pass in the U.S. Senate with a simple majority of only 51 votes. Ordinary bills are subject to the filibuster in the Senate unless they can achieve a supermajority of 60 votes.
Because of this, it is an opportunity for the party in power — in this case, the Democrats — to work in policy goals that are less likely to receive bipartisan support.
What would the program do?
The Critical Supply Chain Resiliency Program would be funded by a $10 billion investment over a 10-year period. Its main goal is to create a central hub of visibility for the nation’s entire supply chain.
Think of it like control tower software, but on a national scale rather than an organizational one. This program would provide the Department of Commerce with the tools to map supply chains and create national performance dashboards.
It is also a way of the government contributing funding to industries that significantly influence the U.S. supply chain, particularly manufacturing.
The Department of Commerce Critical Supply Chain Resiliency Program is like control tower software on a national scale.
Why is this important?
This new program demonstrates that the federal government is learning from the various supply chain disruptions that have arisen during the COVID-19 pandemic.
It would proactively bolster the nation’s readiness for any future crises as well as simply make the movement of goods easier during normal times.
It will draw on the success that private organizations have had in creating visibility within their own supply chains and uses those tactics to strengthen the nation on the whole.
This change went into effect in 2020, but has a potential long-term impact on driver capacity.
Especially with the continued concerns about the commercial truck driver shortage, this is a good piece of federal policy to keep in mind.
What is the FMCSA Drug & Alcohol Clearinghouse?
Registration for the US Department of Transportation’s Drug and Alcohol Clearinghouse has been officially open for over a year, and as of January 6, 2020, prospective or current employers can conduct queries on drivers’ histories.
The long-awaited Drug & Alcohol Clearinghouse will serve as a secure, online database that will allow relevant parties to identify — in real-time — whether or not a Commercial Driver’s License (CDL) holder has violated any federal drug and alcohol testing program requirements within the past five years.
Relevant parties include: United States Department of Transportation (US DOT) or more specifically the Federal Motor Carrier Safety Administration (FMCSA, which is part of the DOT), current and potential employers, state driver licensing agencies, and law enforcement officials.
The FMCSA Clearinghouse will serve as a secure database that will allow relevant parties to identify — in real-time — whether or not a CDL holder has violated any testing program requirements.
Does the clearinghouse change existing regulations?
No, the regulation does not change the existing DOT workplace drug and alcohol testing requirements — it is just bringing existing procedures into a centralized database.
Many motor carriers and transportation officials concerned with driver safety have long advocated for the Clearinghouse.
It was designed to bring more transparency to the industry by helping carriers to better vet new drivers and make sure currently employed drivers do not present a risk.
Simply put, the objective of the Clearinghouse is to improve safety on our nation’s roads by creating greater visibility into CDL drivers’ drug and alcohol testing behavior.
When did the FMCSA Clearinghouse take effect?
On January 6th, 2020, the FMCSA officially implemented the program, meaning:
- Employers are required to conduct electronic queries in the Clearinghouse, checking CDL driver violation histories (as well as traditional manual inquiries with previous employers in accordance with existing procedures).
- Medical review officers and substance abuse professionals are required to submit verified positive test results (as well as refusals) to the Clearinghouse.
- Drivers are able to view their own records (which will only contain information recorded on or after January 6, 2020).
- States and licensing agencies have the option to request information from the Clearinghouse before completing certain CDL transactions.
Though currently employed drivers are not required to register immediately, on January 6th, 2023, this will become a requirement for new CDL applications and renewals.
FMCSA Clearinghouse Registration
The FMCSA encourages all CDL holders (drivers) to register for a free account as soon as possible to review information and confirm the database is accurate.
Employers of drivers are now required to look up drivers in the Clearinghouse during the hiring process, as well as conduct an annual audit for currently employed drivers. This will be in addition to any other drug and alcohol testing that a carrier conducts.
Though registration is free for drivers, carrier queries to the database to look at driver history are not — the FMCSA will charge $1.25 per query.
Carriers can purchase search bundles for discounted fees to reduce the cost. The FMCSA recommends that carriers buy bundles based on their fleet size and anticipated annual hiring needs. Large fleets can even pay a flat rate for unlimited queries.
How will the FMCSA Clearinghouse impact the trucking industry?
Only infractions that occur on or after January 6, 2020 will be recorded, so it will take some time for this information to build up in the database — meaning there will not be any immediate impact to the industry.
That said, many shippers and carriers are concerned about the operational growing pains and potential cost of the new program.
There is also fear that the Clearinghouse will weed out more drivers with substance abuse violations, resulting in less carrier capacity and exacerbating an existing driver shortage issue.
Ironically, weeding out drivers that violate federal drug and alcohol testing standards has always been a core goal of FMCSA.
It will take some time for this information to build up in the database — meaning there will not be any immediate impact to the industry.
These rate and capacity fears are natural in a tighter labor pool.
While the establishment of a federal repository for testing violations will undoubtedly remove some drivers from service — putting pressure on the owner-operator sector of the industry in particular — this is not likely to have a material impact on shipping rates and capacity.
In all likelihood, the trucking industry will adapt to this regulatory scheme after a relatively short adjustment period, similar to previously implemented compliance obligations (i.e. ELDs).
In short, there is no real change in the underlying DOT drug and alcohol testing program. The Clearinghouse is just making the existing procedures more efficient for employers and licensing agencies.
For more information on the Clearinghouse regulation, the DOT has compiled a helpful FAQs resource that you can view here.
Note: None of this should be interpreted as legal advice. If you need legal advice for your business, consult your own counsel.
In our recent Coyote Digital Summit, Sr. Government Relations Executive for UPS Tom Jensen and VP of Supply Chain & Logistics for the Consumer Brands Association Tom Madrecki discussed the infrastructure bill, AB5 and more trending policy topics.