In The News
Outlook: Trucking regulations and the new administration
As Donald Trump prepares to take the oath of office this month, many motor carriers are rightfully wondering how much change his administration will bring to the trucking industry.
On the one hand, Trump's unvarnished dislike of current trade agreements—the Trans Pacific Partnership (TPP) is all but dead, and he's publicly called into question sections of the North American Free Trade Agreement (NAFTA)—could potentially harm motor carriers. Much of the domestic freight hauled by trucks comes from trade activity.
On the other, a "regulatory rollback" of sorts may be in store for several proposed rules (e.g., the speed limiter mandate) though ones already in place (e.g., electronic logging device requirement) may be left alone.
David Kelly, a longtime automotive industry expert who served as acting administrator of the National Highway Traffic Safety Administration (NHTSA) under President George W. Bush and is now president of consulting firm Storm King Strategies, says whatever eventually happens regarding which rules stay and which ones go all boils down to the priorities set by the incoming administration.
Kelly says advice given to him by Transportation Secretary Norman Mineta bluntly illustrates that maxim. "He used to tell me, 'At the end of the day, we are all staff,' even the transportation secretary," Kelly emphasizes. "Everyone has a higher pecking order; the only one who doesn't is the president."
However, he adds that even presidential priorities must follow the rules of the regulatory game. And that means a rulemaking can't become truly "final" until Congress has a chance to review it within 60 days, Kelly says.
"When a new president comes in, all pending rulemakings that have not been finalized will be withdrawn pending an internal review," Kelly explains. "So the date really isn't Jan. 20—Inauguration Day—when any outstanding rule needs to be finalized. It was actually back on Nov. 20, 2016, when it needed to get published and sent to Congress before the 60-day review; otherwise, it becomes subject to a review by the new administration."
Avery Vise, president of consulting firm TransComply, anticipates that the long-awaited drug and alcohol clearinghouse posted by the Federal Motor Carrier Safety Administration (FMCSA) back in early December should be safe. But others may be at risk, such as the following:
◗ Driver training: "On paper, it looks like everybody agrees because there was a negotiated rulemaking." However, the American Trucking Assns. (ATA) and the Owner-Operator Independent Drivers Assn. (OOIDA) are on opposite ends of the sprectrum when it comes to training. ATA is behind the published rule that includes performance-based training while OOIDA backs a minimum number of training hours and not based on the number of hours.
◗ Safety fitness determinations: "It's not so much a partisan issue, as the whole proposal is greatly flawed. It's not even clear that if Hillary Clinton had won the election that the rule would have proceeded."
◗ Obstructive sleep apnea: "There are going to be some significant costs to carriers and potentially capacity-draining ramifications. I think we're certainly going to go slow, and it may be shelved."
◗ Speed limiters: "It's somewhat more political than you would've expected. Now that it's been proposed, the rule has become a lot more controversial than it might've been a decade ago [when ATA first petitioned for it]. In part, a lot of states have adopted higher speed limits, and putting speed limiters in will create a greater differential. That's exacerbated by the fact that the proposal doesn't even pick a speed and was very unclear. It's particularly controversial in the Western states that have higher speed limits—and they're very strongly in the Republican column."
◗ Minimum insurance levels: "This is a proposal that really has died, even within the Obama administration. The trial lawyers are very close to the Democratic Party, and this is something that the community wanted. Higher minimums ultimately would lead to higher settlements and higher contingency fees. I put that as a virtual zero chance of happening."
The twist for trucking in all of this is that almost any list of priorities selected by Trump will impact the industry in some fashion, notes Chris Spear, ATA president and CEO.
"When you move 70% of the nation's domestic freight, there are few issues out there that we are not a part of either directly or indirectly," he says. "Tax reform, trade, and infrastructure—we have a role to play in all of those issues."
For starters, he noted that the 10- year, $1-trillion infrastructure proposal put on the table by Trump late last year could be a big positive for the industry in a number of ways.
"Infrastructure is our industry's lifeblood. We need good infrastructure, and getting such a package passed is key right out of the gate," Spear notes. "At least as proposed, that package will likely be tied to tax reform."
Spear says trade is another pivotal issue, as over 76% of NAFTA surface trade is carried by trucks. "Again, we have to help shape whatever trade proposals will look like," he stresses.
When it comes to regulation, though, Spear says "it depends."
"We're not afraid of regulations; we're a very heavily regulated industry. But what we want are good, clear regulations that we can comply with without undue burden and a measurable return," he points out. "Look at the Phase 2 greenhouse gas rules. They will define future efficiency for our industry and offer a measurable return for our investments. This is a win-win for us and the environment.
"But where regulations don't work, we'll oppose them. For example, we will oppose the speed limiter rule [because] it's a completely flawed approach."
In the end, he stresses, it "all really comes down to good give-and-take between industry and the regulators."
Todd Spencer, executive vice president of OOIDA, believes there's been far more take than give in recent years where regulatory oversight of trucking is concerned. And he's hopeful the changeover in administration might encourage a fresh look at highway safety as a whole.
"The regulatory regime has been on steroids for the past few years. Is there a cumulative effect? There sure is," he explains. "The kind of mind-set in the regulatory/legislative community right now is that more is better. But although there's been more regulation and more compliance than there's ever been, crash numbers keep going up, not down. So what the very people making all of these rules should be asking is, 'What the hell is going on?'"
This trend can be illustrated by data found in the Large Truck and Bus Crash Facts 2014 report issued by FMCSA in April of last year. From 1979 to 2009, total fatal crashes involving just large trucks and buses dropped from 6,007 to 3,193, a decline of 46%, or some 2,814 fatal crashes. But from 2009 to 2014—not quite a decade—fatal crashes increased from 3,193 to 3,649, an increase of 12%, or 456 crashes.
According to preliminary data released by NHTSA last July, fatalities in crashes involving large trucks also increased by 4% during 2015, with 9 out of 10 regions within the United States reporting increases in traffic deaths for that year.
"The [safety] system as it currently exists is missing everything; we've never had more regulations or compliance with regulations, yet crashes keep going up," Spencer says. "At some point, you have to say time out. We have to ask what things are important. Enforcement and safety are not the same things; there's no connection between more enforcement and fewer crashes."
Sandeep Kar, global vice president of mobility for global consulting firm Frost & Sullivan, also believes that a Republican-controlled Congress coupled with Trump's presidency could mean a deceleration or "de-prioritization" of several regulations focused on trucking.
Though hours-of-service regulations have long been unpopular among truckers, especially owner-operators, most industry observers expect them to be left unchanged since the regulatory focus of Trump's administration in its first several months will likely be on issues concerning trade and immigration.
"The ELD mandate, which is scheduled for introduction this year, will usher in a wave of digitization in trucking and also looks to remain unaffected as this mandate had strong Republican backing," Kar adds. "Repealing it at this late stage seems unlikely."
Looking at it from a broader perspective, he stresses that few industries will face the impact—whether net positive or negative—of a Trump presidency as strongly as trucking, which he says is a "leading indicator of economic activity" and typically feels the effects of economic swings and fluctuations well before many other industries or sectors.
"While the effect of the Trump administration's legislative actions will be experienced primarily by the U.S. commercial vehicle industry, global market participants and markets will have much to note and consider," Kar explains.
"Most presidential transitions include reasonable certainties regarding upcoming policy priorities and changes that enable nations, markets, and industries to prepare for their impact," he says. "Over the past several decades, proposed policy changes generally have had narrow boundaries. This time it is different, and it is going to be more different for trucking than ever before."
"Lower corporate taxes would likely result in businesses considering either establishing or reshoring U.S. operations," Kar emphasizes. "While on the surface this would appear to be great news for the U.S. trucking industry, it may not be as great for either U.S. or global truck manufacturers and suppliers. Lower corporate taxes will most likely drive service-based businesses to the U.S., which would be of less benefit to freight movement than a move of manufacturing operations."
Another concern is that labor costs could spike as lower corporate taxes could drive inflation, resulting in wage hikes that would render the incentive of lower taxes much less effective.
Moreover, Kar thinks the U.S. and many other economies are still unstable, with many nations skating dangerously close to recessionary boundaries. Thus, economic and trade policy changes could induce short-term recessionary spasms before a clearer and stable picture emerges, he says.
Where trade is concerned, modifications or rejections of trade treaties, such as NAFTA or TPP, could adversely impact U.S. truck OEMs and their suppliers, he believes, as many manufacture and/or source materials from Mexico. But there may be a silver lining from that as well, Kar explains.
"Several Asian OEMs in recent years have secured strong positions in light- and medium-duty truck markets, [and] new trade policies could hurt them, forcing more U.S. localization and higher taxation for market access—both of which will favor U.S.-based OEMs," he notes.
There is another positive, however. Expedited infrastructure refurbishment and/or enhancement projects and public-private partnerships focused on improving U.S. highways and freight movement infrastructure could have a net positive impact on freight and vehicle efficiencies, route congestion, and sales of off-highway vehicles if the administration implements many such projects immediately.
"[But] this could prove difficult because funding [needs] could trigger higher taxes, and Trump has stated his opposition to increase the deficit to pay for his infrastructure plans," Kar stresses.
He points out that the U.S. leads other markets in developing and commercializing technologies, but he warns that any political policies that stifle innovation in digitization, Big Data analytics, information technologies, or mobile and wireless services could hold back the move into a new era for trucking.
"Global freight mobility market fundamentals are slowly but surely being energized, new logistics models are being created, and freight efficiencies are being enhanced by commercial trucking's digital transformation," he explains.
"All of that will disrupt commercial vehicle industry business models, result in the collapse of arcane and inefficient processes and technologies, and transform an industry that forms the backbone of U.S. and global economic activity," Kar says.