EPA Limits Production of Glider Trucks

According to a recent article in Transport Topics, acting administrator Andrew Wheeler has reversed a decision that would have allowed a proliferation of glider trucks until the end of 2019. Wheeler’s decision came just days after 16 state attorneys general filed requests for review by the US State Court of Appeals for the District of Columbia.

U.S. Environmental Protection Agency acting Administrator Andrew Wheeler has reversed a controversial decision made earlier this month that would have allowed the proliferation of glider kit trucks until the end of 2019.

In a July 26 memo to the agency’s enforcement chief, Susan Bodine, Wheeler said a “no-action assurance” order blocking enforcement of the glider kit trucks provision in the 2016 Obama administration’s Phase 2 Greenhouse Gas Heavy Truck Rule is “not in the public interest.”

“The Office of Enforcement and Compliance Assurance has a general guidance limiting the circumstances under which the agency will consider issuing no-action assurances,” Wheeler wrote. “The 1995 restatement of that policy states that the principles against the issuance of a no-action assurance are at ‘their most compelling in the context of rulemakings.’ OECA guidance is clear that a no-action assurance should be issued only in an ‘extremely unusual’ case when the no-action assurance is necessary to serve the public interest, and only when no other mechanism can adequately address that interest.”

Bodine’s “no-action assurance” memo was dated only a day after then EPA Administrator Scott Pruitt resigned amid a dozen ethics investigations. In November, the agency issued a proposed rule to repeal the Obama-era regulation, questioning the notion that the gliders were big polluters and whether EPA even had the authority to regulate the gliders.

Bodine’s “no-action assurance” memo was dated only a day after then EPA Administrator Scott Pruitt resigned amid a dozen ethics investigations. In November, the agency issued a proposed rule to repeal the Obama-era regulation, questioning the notion that the gliders were big polluters and whether EPA even had the authority to regulate the gliders.

Wheeler’s action came July 26, only days after an environmental coalition and 16 state attorneys general filed separate requests for review by the U.S. Court of Appeals for the District of Columbia, claiming that not enforcing the glider provision in the 2016 Phase 2 Heavy Truck Greenhouse Gas rule would allow thousands of the “super polluting” glider trucks on U.S. roadways.

The court quickly issued a temporary stay of the EPA nonenforcement plan while it considers whether to approve or deny the emergency motions filed by environmentalists and the states, which said allowing the production and sale of more than 300 per-manufacturer gliders — “new heavy-duty trucks manufactured with highly polluting, refurbished engines that do not comply with modern emissions standards” — is unlawful.

“This is a huge win for all Americans who care about clean air and human health,” Fred Krupp, president of the Environmental Defense Fund, one of the lawsuit plaintiffs, said in a statement. “These super-polluting diesel freight trucks fill our lungs with a toxic stew of pollution. EPA’s effort to create a loophole allowing more of them onto our roads was irresponsible and dangerous. We hope their decision to withdraw that loophole puts a firm and final end to this serious threat to our families’ health.”

Glen Kedzie, energy and environmental counsel for American Trucking Associations, told Transport Topics, EPA’s reversal of its prior decision to not enforceglider vehicle provision under the final Phase 2 rule was a welcome announcement, which reaffirms the agency’s legal authority and responsibility to the public to close the dangerous emissions loophole created by a small special interest group of manufacturers. We will await EPA’s next steps as this issue continues to evolve.”

In their emergency motion, the environmentalists said the trucks are “poised to spend their lifetimes emitting many times more smog-forming nitrogen oxides, lung-damaging particulate matter and cancer-causing toxics than lawfully built heavy-duty trucks. Relief is urgently needed from EPA’s unlawful action in order to avert substantial and irreparable public-health consequences.”

The attorneys general in their court brief said, “Testing of glider vehicles conducted by EPA in 2017 showed even greater emissions impacts: NOx emissions were as much as 43 times higher than emissions from compliant vehicles, and PM emissions as much as 450 times higher. NOx and PM are linked to serious adverse health effects, including increased incidence of respiratory and cardiovascular disease and premature death.”

 

To read the article on Transport Topics, click here.

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Human Error Takes Toll on Global Supply Chain

Although there is a plethora of technology in today’s global supply chain industry, many jobs still require human interaction. According to a recent article in Inbound Logistics, the problem is that too many people are making too many mistakes.

By Matthew Tillman, CEO & Co-founder, Haven, Inc. writes in Inbound Logistics:

Most business is driven by an incentive to grow. The global supply chain follows a different narrative. Growth costs more than is affordable for the steamship line whose business it is to transport cargo, and there’s no way for these carriers to differentiate from competitors. Instead, carriers cut their costs and increase their margins.

The supply chain is broken because there are too many people who are doing too many things wrong. The result is human suffering. Businesses are deprived of the goods they sell. Communities are deprived of the food imports upon which they depend and workers are exploited. These practices are part of the history of the shipping industry. While identifying their symptoms is easy, finding root causes is difficult when the problem behaviors are taken for granted.

The most visible symptom of the ineffectual structure of shipping is criminal corruption, the type that lands an executive in prison seemingly every year; for example, the conviction of an employee of shipping line NYK with price fixing. Lacking solid data to prove price fixing is rampant, trade is structured to make it a very tempting crime because transporting cargo is a uniquely low-margin business in which the cost of growth is linear.

Customers of shipping lines aren’t encouraged to pay one particular carrier more for better offerings. Another option is for lines to improve customer experience, which could justify a carrier charging higher prices, but that means hiring workers. A carrier is likely to differentiate by lowering prices with lower interest rates on financing of new ships and loans that insure cargo.

Shipping lines will try to negotiate with banks for better interest rates, but this requires them to promise a certain volume of business to support the number of ships the bank is financing. Some lines are fortunate enough to be headquartered in countries that subsidize their business, giving them an edge over competitors. Lines that fail to secure good rates or subsidies have to consider other means to either increase margins. They can spend less on labor, which can easily lead to exploitation; an example of this is labor abuses in the Thai fishing industry.

Limited opportunity to differentiate and charge more is one reason margins are tight for shipping lines. Another is that adding a new line of business is expensive. In most industries, expansion becomes cost-effective over time, but not for carriers. Each new shipping line requires as many workers as established lines, so to start running a new ship between ports is as expensive as founding an entire new carrier company. This deters shipping lines from expanding and working with more customers, reinforcing their focus on increasing margins by lowering costs.

Examining the Root Cause

This problem of restricted expansion is where you understand that people are the problem. Too many workers are needed to keep things running because too much work is required for basic tasks. The average shipment with French carrier CMA CGM entails 22 booking changes before it’s booked to be transported.

Instead of a customer filling out a form online that automatically transfers information to every electronic location where it needs to be, workers physically copy and paste addresses from incoming orders to outgoing directions for laborers handling the physical cargo. Invoice errors are inevitable in this process, leading to billing disputes. The typical shipper loses $50,000 to $150,000 a year from invoice mistakes by carriers, according to one auditor. The ramifications of an error can be even more costly. If a dispute means a grain import doesn’t dock and unload, people aren’t eating.

As much attention as we pay to exploitative labor practices in palm oil production and brick making, we rarely look at the expenses that might incentivize these tragic systems. We bemoan world hunger and the irony of food waste, but we rarely look at why more food isn’t transported. The incentive and why is our broken global supply chain, and the problem is people. Automating shipping would lead to fewer errors and workers, which could lower transportation costs and allow for more cargo to be transported. Until shipping is automated, it will be glutted with people performing minute, redundant tasks, with a high propensity for error.

Click here to read the article in Inbound Logistics.

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Many Small and Mid-Sized Enterprises say Technology Drives Trade Growth

We know that technology continues to drive change in the transportation sector, but are companies more optimistic about it than we think?  According to a recent article in Inbound Logistics, approximately 80 percent of executives at small and mid-sized enterprises, who were surveyed, say that they use online platforms for rate quotes and bookings.

Felecia Stratton writes in Inbound Logistics:

Small and mid-size enterprises (SMEs) struggling for equal footing in the global economy increasingly look to cross-border trade for growth, seeing technology as a way past obstacles in shipping and compliance, according to new research from Shipa Freight.

Shipa Freight’s global study of 800 SMEs from developed and emerging markets shows smaller companies are remarkably upbeat about their ability to expand through trade.

Eighty-nine percent of exporting SMEs surveyed say their export revenue will grow over the next three years; 71 percent say they are concentrating more on international markets than on their home markets. The Shipa Freight survey included exporters and importers from the United States, UK, Germany, Italy, China, India, Indonesia, and UAE.

Smaller companies account for an estimated 95 percent of all businesses and employ two-thirds of the world’s workers. Critics of globalization have argued that decades of efforts aimed at easing the flow of goods, capital, and jobs across borders have come at the expense of SMEs and disproportionately benefitted multi-nationals and other large businesses.

Three-quarters of SME executives surveyed believe businesses that operate internationally are more resilient. Nearly 80 percent say they use online platforms for freight quotes and bookings.

SMEs that view the UK as one of their top export markets are looking elsewhere because of Brexit. Britain’s vote to leave the European Union has prompted 73 percent of respondents to prioritize trade with other European countries. Sixty percent of UK SMEs that export and 52 percent of UK SMEs that import say leaving the EU Single Market would be “disastrous” for them.

Smaller companies clearly see technology as a way to close the gap with bigger competitors, cope with documentation requirements, and access competitive shipping options. Eighty-six percent say technology is leveling the playing field for SMEs to operate globally; 89 percent believe technology is transforming the logistics sector.

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Trucking Industry Prospers, Trade Policy Holds Uncertain Effects

The economy is booming and unemployment rates are low at 3.8 percent, according to a recent article by Transport Topics. There are actually more trucking jobs than there are people looking for those jobs. There are currently 50,000 available full-time trucking jobs needed to support NAFTA. However, with the United States placing tariffs on other countries, including allies Mexico and Canada, it’s unclear what effects these tariffs may have on the industry.

Burney Simpson, Staff Reporter for Transport Topics writes:

The economy and trucking are in good shape for the second half of this year despite issues including the driver shortage. But uncertain trade policy is having an impact on future expansion, according to three industry experts who spoke June 7 at American Trucking Associations’ 2018 National Accounting & Finance Council annual conference in Raleigh, N.C.

The panel Economic Trends in Trucking Amidst Policy Changes featured Brad Delco, managing director of investment firm Stephens Inc., and Kenny Vieth, president of industry analyst ACT Research Co. It was moderated by ATA Chief Economist Bob Costello.

Summer is here and the overall economy is strong with three important forces doing well simultaneously, reported Costello. First, the consumer is at work with an unemployment rate at 3.8%.

“We have more job openings than people looking for work. This year wages could go up 3.5%. There is fast growth and that brings spending,” Costello said.

Then there’s a busy construction industry and factory output possibly growing 3% this year, Costello said.

Specific to trucking, business is growing as “more firms are going to two-day delivery. Inventory is cycled through faster at warehouses, but at the same time they have to have inventory on hand to be delivered,” Costello said.

Another positive is the sales and orders for trucks, Vieth said. “The technology in the new trucks is changing. Automated manual transmissions are huge, the safety technology is becoming a must have, the driver-assist technology such as lane departure, automatic braking, anti-rollover, all of this is wanted now,” Vieth said.

So, Costello asked, what challenges face the industry?

“The only constraint on this industry is a lack of drivers,” Delco said. And many carriers are addressing that by raising compensation to recruit and retain drivers.

The major problem at the moment is uncertainty on U.S. trade policy and the threat of tariffs, Vieth said. Tariffs typically lead to higher prices for steel and other commodities needed to build equipment.

“Policy is not clear. Then we’ve got events like Italy possibly leaving the European Union,” Vieth said. “Is that much ado about nothing? What happens to the EU when you consider Italy is the seventh largest economy in the world?”

Delco believes the economy will slow in 2019. He argues the long bull market in stocks appears to have hit its peak as trading whipsaws up and down. Meanwhile, policy announcements from the White House give investors pause.

“The stock cycle is long in the tooth, there’s greater volatility, the uncertainty is greater and people may pull back capital,” Delco said.

And it’s not clear why the United States is placing tariffs on allies such as Canada and Mexico, especially since it has trade surpluses in key commodities with these countries, Costello said. The renegotiation of the NAFTA trade agreement has become contentious and any deal, if it happens, won’t be signed until 2019.

“NAFTA is very important to trucking,” Costello said. “There are 50,000 full-time trucking jobs needed to support NAFTA, including 31,000 drivers. It means $6.6 billion annually to the trucking industry.”

In sum, trucks this summer have a full load and a relatively open road but be prepared next year for some congestion.

The NAFC conference was held in conjunction with ATA’s Technology & Maintenance Council Fleet Data Management & Cybersecurity Conference at the Marriott City Center in Raleigh.

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Why the Trucking Industry is Worried About NAFTA

One of President Trump’s top priorities is to rework trade deals so that they are fair to the U.S. But, what if leaders cannot reach an agreement and NAFTA ends altogether?

Published by Transport Topics, Connor D. Wolf | InsideSources.com (Washington, D.C.) writes:

 President Donald Trump has pledged to rework trade deals so they benefit domestic workers, but current efforts have sparked concern among industry groups, including trucking.

The North American Free Trade Agreement became a critical component in the national economy when it was implemented in 1994. The trade deal is now facing major changes as partner countries rework its many provisions – a process that has been marred by contentious negotiations and a possible pullout by the United States.

President Trump entering office became the catalyst for the renewed trade talks. He has been highly critical of current trade agreements like NAFTA which he sees as undercutting domestic workers. Industry groups generally agree that the deal should be updated, but have become increasingly worried about the direction talks are going.

“Compared to when we started I have to say I’m a bit more pessimistic,” American Trucking Associations chief economist Bob Costello told InsideSources. “I thought it was a great idea to update NAFTA. I think everyone was under the impression that it would be a lot easier than it’s been, and therefore I think reality has set in and we’re probably a little bit more pessimistic. But by the same token, I don’t think it’s all done either.”

The fifth round of negotiations in Mexico City, Mexico, ended with lingering tensions when they closed Nov. 21. The next round of negotiations is scheduled to begin Jan. 23 in Montreal, Canada.

NAFTA has been a major point of contention since it was first implemented over two decades ago. Critics have argued the trade deal has benefited large corporations or foreign workers at the expense of domestic workers. But to industry groups, the trade deal has been vastly more beneficial than not.

“From our perspective, NAFTA has been a win-win,” David French, senior vice president for government relations at the National Retail Federation, told InsideSources. “It has been very successful agreement by most measures. The flaws in the agreement can be fixed by negotiating. You’re not going to get the best agreement by threatening to pull out.”

NAFTA was negotiated as a free trade agreement between the United States, Canada, and Mexico. The agreement reduced or eliminated tariffs and other trade restrictions to open up more access among the partner countries. It was able to increase trade dramatically in the region.

“The vast majority of products that go over the southern border and the northern border involve trucks,” Costello said. “That’s generated $6.5 billion in revenue annually for our industry, and that means we’re employing over 46,000 people who’s jobs sorely depend on NAFTA, including over 31,000 U.S. truck drivers.”

President Trump hopes to use trade and other reforms to encourage domestic production – which could result in more jobs. But some domestic production faces barriers that other countries don’t have. Restricting foreign trade in certain circumstances could hurt both domestic companies and consumers by limiting the flow of goods they might rely on.

Mexico, for instance, is the only place in the world that can grow avocados year round. The country, as a result, supplies 45% of the global avocado market. Texas A&M University found in 2015 that avocado imports have helped to create roughly 19,000 domestic jobs along with $600 million in tax revenue.

“We really want no changes, no changes to trade,” Ramón Paz, strategic advisor at The Avocado Producers and Exporting Packers Association of Mexico, told InsideSources. “If we go back before NAFTA, we had a tariff of about six cents per pound. If they reapply that tariff it would have a cost throughout the supply chain. There would be changes for the growers and the shippers and everyone. But in the end, the most affected party would be the consumers.”

Industry groups and companies elsewhere have also been vocal in expressing their concerns and hopes throughout the renegotiation process. About a hundred companies urged federal officials in a letter Nov. 14 not to make major changes to trucking provisions. Food and agriculture groups also sent a letter Oct. 25 warning that withdrawing would cause significant problems for their industries.

Industry groups have been particularly concerned about the rhetoric coming out of the administration. The president has also proposed several contentions proposals which partner countries are unlikely to agree with. U.S. Chamber of Commerce President Tom Donohue called some ideas “poison pill proposals” which threaten to undermine talks.

“We’re hopeful but some of the rhetoric out of the administration hasn’t been helpful,” French said. “We’re hopeful the administration is just playing a game to achieve maximum leverage in the agreement but is ultimately interested in constructing a solution rather than tearing the agreement apart.”

U.S. Trade Ambassador Robert Lighthizer detailed during a congressional hearing June 22 that the administration plans to renegotiate trade deals to be fairer and more efficient, enforce trade deals more aggressively, and increase domestic exports. Those goals have been consistent talking points as the administration has discussed trade.

The disagreements and heated rhetoric have fueled concern throughout the economy. Many businesses rely on the massive trade deal which makes them vulnerable depending on how the negotiations end – while creating uncertainty in the process. Alliance of Automobile Manufacturers federal affairs vice president Jennifer Thomas notes that there are two bad outcomes that could potentially come from these talks.

“It’s hard to see how we end up in a good place at this point,” Thomas said. “At this point, we’ve been envisioning two scenarios. One where we’re looking at an unworkable NAFTA because we have an erroneous rule of origin that we’re having to meet, or that there is no NAFTA.”

Trump has said he is trying to make a better trade deal but is willing to pull out if not possible. Investment bank Goldman Sachs announced late last year that it expects the administration to ultimately withdraw from the trade deal. Industry groups warn that there would be immediate economic harm if the administration does decide to step away.

“We’re growing more concerned by the prospects of the administration using the treat of a withdrawn as leverage in the negotiations,” Thomas said. “And I think that if the president were to trigger a withdraw, there would be immediate ramifications. It’s hard to see how we could pick of the pieces at that point.”

Thomas adds withdrawing could undermine other achievements like tax reform which helps the business community. She also notes that withdrawing could create a lot of uncertainty across many industries. Costello warns that it would be disastrous for the trucking industry – which plays a critical role in trade.

“The NAFTA renegotiations are critical for our industry,” Costello said. “If it were to go south and we pullout, it would be disastrous for us. We obviously have a big stake in it and as a result, I’ve been following it closely.”

The American Action Forum, a center-right nonprofit, released a report Dec. 11 claiming that withdrawing from the trade deal could jeopardize 14 million jobs. The report also found that withdrawing could expose businesses to $15.5 billion in new tariffs and increase consumer costs by at least $7 billion.

The NAFTA negotiations are still ongoing so there is still hope for the business community. Reuters found in a survey Jan. 19 that the majority of economists expect the U.S. to stay in the deal – but there is still the issue of what the finalized reworked deal will look like. Industry groups are generally open to updating the trade deal – but are concerned over what the outcome will be.

“I think that we’re concerned about the direction that administration seems to be taking the talks,” French said. “I think that everyone agrees with the goal of modernizing the agreement. But too many times in the last several months the White House has suggested that maybe the outcome will be to pullout of the agreement, and that’s not a constructive approach.”

The national economy has changed in dramatic ways since the trade deal was first implemented. Technology, like new forms of communication, have shifted markets and opened up new avenues for international trade. The internet, for instance, has provided a whole new way to shop and conduct business.

“We went into this process thinking it was just going to be a modernization of NAFTA,” Thomas said. “We realized that this was going to be more than that and then we saw the contentious proposals that were tabled in the fourth round. Our industry [automobile manufacturers] really feels like we’re in the crosshairs at this point.”

Costello points to a cross-border trucking program that could be in jeopardy as the talks progress. The federal program allows Mexican truck drivers to make long-haul deliveries in the United States. The program is intended to reduce contentious interactions at the border – but it has also faced opposition.

“We’ve been supportive of the Mexican truck program,” Costello said. “It’s now an open door policy for all Mexican truck drivers to come across the border. But it is good and has the potential to be better. It’s a relief valve to clear congestion at the border.”

Trump was also able to upend another major trade deal before it was fully implemented by withdrawing from the Trans-Pacific Partnership (TPP). The agreement would have been the largest regional trade deal in history at roughly 39% of global GDP.

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