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First Thoughts
  By Dan Gilmore - Editor-in-Chief  
  - Nov. 6, 2014 -  

Election 2014, the Supply Chain and Beyond


US elections were held Tuesday, and obviously produced a big night for Republicans, taking back control of the Senate, among other gains.

Here, am going to briefly reflect on the impact this result may have on the supply chain, and then take the opportunity to summarize key legislative and regulatory issues that most of us should at least have passing knowledge of, if not something better than that. I think doing such a review once a year or so makes sense, and why not in conjunction with a major election, especially one that did indeed change the status quo.

As I always say, I try to play this straight down the middle, lest I receive a spate of angry emails from one side or the other, but having said that I will admit to coming at most of these issues from what is good for supply chains and businesses, as this is the audience we serve and at times represent.

Gilmore Says:

The special Congressional panel on 21st century freight transportation - chaired by a Republican - pushes the goal of moving more US goods by rail and by a revived barge industry.

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In general, I don't think the change in Senate control will have any monumental impact on supply chain related issues. The Republican controlled House had been taken no action on several "bad" bills, such as one which would have allowed ports to take local action on trucking issues, which would have led to a patchwork of costly regulations.

Now, however, legislation the House has passed or is likely to pass will get a hearing and often approval in the Senate and sent to the President for signature or veto, whereas the House bills basically never had an audience in the other chamber in recent years.

Therefore, I would expect the now fully Republican controlled Congress to eventually send the following bills related to the supply chain to Obama:

Approval of the "Keystone Pipeline":
The state department has been dithering with this for years, and while I think it is more symbolic than truly consequential in the grand scheme of things, I believe such legislation will be sent to the President, likely with strong Democratic support as well. Obama may just sign it. I think it might even be passed with veto-proof margins. Think we will see other "energy independence" legislation.

Repatriating Offshore Cash: US companies have more than $2 trillion - a staggering figure - stashed overseas. Why? Because unlike most other countries, the US does not let multinationals simply pay the local region's taxes, but rather that plus taxing these profits again at (high) US rates if the money was brought back home. Earlier this year, it was said GE alone had more than $110 billion in such offshore cash.

I expect some bill to be passed that taxes such repatriated cash very modestly. If Obama were to sign it, that "found money" might make its way into the budget you need for that new distribution center, factory, or supply chain planning software that couldn't make the financial cut before, if you are a large company with this issue/opportunity. That could spur some economic growth for all the rest of us too. No idea if the President will sign it - depends on how low the rate. The White House wants a higher rate, with much of the proceeds used to fund infrastructure spending.

Renew Fast Track Trade Agreements Law: The Trade Protection Authority, which allows only straight up or down Congressional votes on trade agreements (no amendments), expired in 2007. Harry Reid in the Senate would not allow a bill to renew that process to come to a vote. That is now likely to change, and the President is likely to sign it. Two pending trade agreements might now move forward: The Trans-Pacific Partnership being negotiated by the US and 11 other countries in the Pacific, and the Transatlantic Trade and Investment Partnership between the US and the European Commission.

With those relatively brief predictions, here are a series other legislative/regulatory issues and updates with which it might be good to be familiar (thanks to John Cutler, NASSTRAC's legal counsel, for help with this):

New Highway Funding Bill:
Last summer, Congress basically again kicked the can down the road, extending the current program, passed in 2012, through May of next year. I expect a longer term proposal will now be developed, with both Houses under Republican control. How long, and where the funding will come from, are as always the key questions. Some funding could come from tax revenue achieved through repatriation of corporate cash, as noted above, and you should expect some very modest at best increase in gas and diesel taxes (which maybe easier to get through with current low oil prices.)

Heavier Truck Proposal Treading Water: The proposal to allow heavier trucks (97,000 pounds) on US highways - with the addition of a sixth axle - was tabled for additional study almost two years ago now, and seems unlikely to see any action until that study is completed by the FMCSA. The last news update from the Coalition for Transportation Productivity, a shipper-backed group that lobbies for the change, was Oct. 1, 2013, which says it all.

That's too bad - it's a good idea that would take trucks off the highways and partly address the driver shortage issue. Key impediments: savvy anti-change tactics from "public interest" groups often backed by the rail industry, and lukewarm support from carriers worried they'll just carry more freight per load for free- and they might just be right about that.

National Labor Relations Board Likely to approve "Microwave" Union Elections Soon: The hearings were already held on proposed rules that would dramatically shorten the time from when a vote to unionize receives sufficient support from workers to when the election actually occurs - the NLRB could announce the new rules any day. The changes also require companies to give more worker contact information to union organizers. The changes are thought to make unionization more likely, in part as companies have less time to mount a counter-offensive. These rules will be changed, but expect a strong challenge in court likely to delay implementation.

US "Strategic Direction" on Transportation is Away from Trucking: The special Congressional panel on 21st century freight transportation - chaired by a Republican - pushes the goal of moving more US goods by rail and by a revived barge industry. This is consistent with the DOT's own strategic plan. Both could impact US government policy, though just how is not yet clear. One path would be heavier taxes to account for full "social costs" trucking, but that will not happen with Republican Congress - unless it can be done by executive order. This is likely to be big issue over next 5-10 years.

Rules Mandating use of "Electronic Data Loggers" by Truckers Coming in 2015: While most large carriers already have such devices deployed, most small and medium carriers do not. Lack of such electronic tracking allows some drivers to skirt Hours of Service Rules. Some predict when the data loggers prevent that, there will be more customer service issues than shippers currently realize. Be ready.

Contract Truck Drivers being Classified as Employees: This is being pushed from several directions - state law (e.g., New York), recent court decisions, recent labor protests by some drayage drivers in California, etc. States often in favor of this change, as it would drive revenue gains (taxes, workers' comp, etc.). Hot button issue for Teamsters, others. Would raise carrier costs substantially, as much as 30% per driver. One to watch for sure.

Coming FMCSA Rules on Driver "Coercion": Hearings have been held on these rules that could fine shippers for somehow coercing a driver to take a load that would force him or her to violate HOS or other regulations - apparently sometimes if the shipper doesn't even know that's the case. The rules might also mean it is coercion if a company takes a load from a driver who doesn't have enough hours left and gives it to another (financial coercion). Strange stuff - we'll keep you posted.

I am out of space. Other important legislative/regulatory issues: new regulations on so-called "bottleneck pricing" by rail carriers (long expected); new funding for improvements at US ports; further expansion of the Mexican trucker program, the mandate for 100% cargo screening that was delayed again last summer; final rules stemming from the Compliance, Safety, Accountability (CSA) initiative, which could take many drivers out of the market and subject shippers more liability.

I am sure there is more, but that's about all I can wrap my head around. Make your voice heard - one shipper reaching out to a Congressperson is worth about 10 carriers doing so. Every DC you operate is in someone's Congressional district.

What is your reaction to our summary of key legislative-regulatory issus? Anything important we've left out? Let us know your thoughts at the Feedback button (email) or section (web form) below.


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