In January 2017, Holland & Knight Transportation & Infrastructure lawyers and senior advisors prepared 20 posts for the 20 days leading to President Donald Trump's inauguration regarding what to expect from the Trump Administration, the first session of the 115th Congress and how business planning could be impacted for those in the industry. In this alert, we have prepared updates, if relevant, on transportation-related developments in the Trump Administration's first 100 days, including issues involving Maritime, Motor Carriers, Rail and Antitrust.
Maritime Observations: Not Exactly Smooth Sailing, But Infrastructure Still a Focus
With President Donald Trump's 100th day just completed, the trend towards protectionism continues, but Congress has not passed legislation that would convert the president's most protectionist ideals into law. Even so, there are common objectives among the two branches. Both the president and Congress seem keenly aware that certain aspects of the U.S. infrastructure are in desperate need of upgrades. For instance, the White House and Congress, at different times, have noted the need to help ports and marine terminals invest to ensure that the broader economy remains strong. In this administration, the U.S. maritime industry remains topical.
At the agency level, however, the first 100 days have been a mix of rhetoric, change and confusion, all of which comes with any presidential transition as the agencies adjust to their new chief executive. Some agency activities have raised more concern than others. As an example, U.S. Customs and Border Protection's (CBP) revocation of decades of CBP ruling letters remains a contentious issue, with no clear indication of how CBP will reconcile the realities of the offshore industry, constituent compliance, and its policy position both internally and with the White House. The CBP revocation sits at the cross roads of protectionism, oil and gas industry needs, environmental security and federal regulation – with each begging for a greater weight in the regulatory balancing act. CBP's position over the past several decades suggested that the balance had been struck, yet here we are in another flurry of comments – for the third time in as many presidents.
Given President Trump's broad goals of protecting U.S. interests, it will not be surprising to see more agency-level activity that fleshes out protectionist goals when and where the executive branch can push. Larger, more complex goals will obviously require congressional buy-in, but that is not far-fetched for many of the more prominent maritime concerns. For instance, the idea of supporting maritime infrastructure investment – in particular, sea ports and their terminals – appears to be within reach, with long-term port and terminal infrastructure needs percolating to the top. As we noted prior to his inauguration (see Holland & Knight's alert, "Sailing with the Trump Transition: Cargo, Cabotage and Maritime Infrastructure in 2017," Jan. 5, 2017), President Trump has more than two centuries of challenging history to consider in drafting his policy and structuring his programs. For most of those atop the maritime industry's wish list, he will need Congress to support him.
Momentum Stalls on Speed Limiter Rule
In an earlier article (see Holland & Knight's alert, "Will the Trump Administration Hit the Brakes on the Speed Limiter Rule?", Jan. 9, 2017), we addressed whether the Trump Administration would hit the brakes on the controversial Speed Limiter rule proposed by the U.S. Department of Transportation (DOT), the National Highway Traffic Safety Administration and the Federal Motor Carrier Safety Administration. The answer appears to be yes, because the proposed rule has stalled and it appears unlikely that it will be enacted anytime soon, if ever.
As previously reported, in the Notice of Proposed Rulemaking dated Sept. 7, 2016, it was proposed that each new multipurpose passenger vehicle, truck, bus and school bus with a gross vehicle weight rating of more than 11,793.4 kilograms (26,000 pounds) be equipped with a speed limiting device. The speed limits suggested for trucks in the proposed rule are 60, 65 and 68 mph.
According to DOT, requiring speed limiting devices on heavy vehicles could save lives and an estimated $1 billion in annual fuel costs. The proposed rule has been criticized by numerous groups on the basis that it is based upon insufficient data and fails to make a recommendation regarding which of the three proposed speeds it believes is best and why. In addition, many commenters on the proposed rule argue that the rule is not needed and have even argued that the disparity in speed between trucks and cars would lead to more accidents.
It seems clear for the foreseeable future that President Donald Trump's focus on reducing burdensome government regulations will result in the rollback, repeal or cessation of pending regulations and reduce the number of new regulations. The proposed Speed Limiter Rule lacks widespread support and, in the face of the resistance to new regulations, its passage is in jeopardy. For instance, a broad coalition of 17 trade groups opposing the proposed rule sent a letter on March 21, 2017, to Transportation Secretary Elaine Chao, copying certain members of Congress, opposing the proposed Speed Limiter rule and other regulations cited in President Trump's Jan.30, 2017, Executive Order titled "Reducing Regulation and Controlling Regulatory Costs." The proposed Speed Limiter Rule was identified as a significant regulation whose cost to industries was not justified by meaningful safety or economic value.
As a result of the strong opposition to the proposed Speed Limiter Rule, and the questions that have been raised about whether the rule is needed and whether there is sufficient data in support of the proposed rule, there does not appear to be sufficient momentum for the rule to be enacted.
Electronic Logging Device Rule Remains in Place But Faces Continued Industry Opposition
In an earlier article (see Holland & Knight's alert, "Is There an Opening to Withdraw or Modify Electronic Logging Device Rule," Jan. 13, 2017), we discussed whether the Trump Administration might withdraw or modify the controversial final Electronic Logging Device (ELD) rule, published by the Federal Motor Carrier Safety Administration (FMCSA) on Dec. 16, 2015. As the Trump Administration's first 100 days winds to a close, the answer so far is "No." But that does not mean the industry forces against the rule have thrown in the hat.
By way of background, an ELD synchronizes with a vehicle engine to automatically record driving time for purposes of reporting hours of service (HOS). Subject to exceptions contained within the rule, the rule applies to most carriers and drivers who are required to maintain record of duty (ROD) status. It bears noting that Congress initiated the rule in 2012, mandated as part of the Moving Ahead for Progress in the 21st Century Act (MAP-21). It calls for the Secretary of Transportation to adopt regulations requiring ELD use in commercial motor vehicles (CMVs) involved in interstate commerce, when operated by drivers who are required to keep ROD status.
The effective date of the rule was Feb. 16, 2017, and the compliance date is Dec. 18, 2017, after which there is a two-year phase-in period. Accordingly, beginning Dec. 16, 2019, all drivers and carriers subject to the rule must use certified, registered ELDs that comply with the ELD rule and regulations.
We noted previously that the rule had been the subject of an unsuccessful legal challenge by the Owner-Operator Independent Drivers Association (OOIDA), which challenged the rule arguing, among other issues, that it violated the Fourth Amendment's prohibition against unreasonable searches and seizures. However, the U.S. Court of Appeals for the Seventh Circuit rejected OOIDA's arguments and upheld the ELD rule. In a last-ditch effort to invalidate the ELD rule, on April 12, 2017, OOIDA filed a petition asking the U.S. Supreme Court to accept a further appeal.
To date, notwithstanding its strong stance against burdensome regulations, the Trump Administration has not signaled that it will modify the ELD rule or delay its implementation. Nonetheless, a broad coalition of industry groups opposing the rule have not given up the fight. In a March 21, 2017, letter to Transportation Secretary Elaine Chao, copying certain members of Congress, 17 trade groups opposing the ELD rule and other regulations cited President Donald Trump's Jan.30, 2017, Executive Order titled "Reducing Regulation and Controlling Regulatory Costs." That Executive Order calls for the rollback, repeal or cessation of pending regulations and for a reduction in the number of new regulations. The opponents of the ELD rule asserted in the letter that:
"The ELD mandate alone is estimated to cost a whopping $2 billion, making it one of the most expensive of all federal rulemakings advanced by the Obama Administration. Because the technology is primarily used to manage large fleets of vehicles and is incapable of automatically recording changes in a driver's duty status, this mandate comes with no economic or safety value for our members or the wide range of customers who rely on truck transportation. Meanwhile, the small number of large corporations that benefit from the utilization of ELDs are already using the technology to monitor their productivity. In light of these factors, implementation of the mandate will force our members to bear all the $2 billion in costs associated with the installation of these devices, imposing wholly unnecessary financial and compliance burdens on American businesses of all sizes."
Thus, although the battle to avoid ELDs has so far been lost at the agency level and in court, whether the Trump Administration will reverse course in the face of strong industry opposition remains to be seen. In the meantime, motor carriers need to be mindful of the upcoming compliance deadline and requirements.
Trump's DOT Still Supports Mexican Carrier Rule, But Other Attacks Loom
An earlier article (see Holland & Knight's alert, "NAFTA Discussions May Alter New Rule on Lease of Equipment by Mexican Carriers," Jan. 13, 2017), discussed the Trump Administration's expected renegotiation of, and potential withdrawal from, the North American Free Trade Agreement (NAFTA). Against that backdrop, the potential impact of those renegotiations on the new rule of the Federal Motor Carrier Safety Administration (FMCSA) permitting Mexico-domiciled motor carriers to lease their equipment to U.S. motor carriers (the Mexican Carrier Rule) was discussed. Incidentally, the Mexican Carrier Rule became effective on Nov. 22, 2016, shortly after the election, following an earlier pilot program. Many believe the pilot program and rule resulted, at least in part, to avoid the imposition of retaliatory tariffs exceeding $2 billion on numerous products. Mexico imposed the tariffs based upon its contention that the U.S. was discriminating against Mexican trucks in violation of NAFTA's terms.
Since the inauguration, President Donald Trump's stance and rhetoric on NAFTA have softened somewhat. While the Trump Administration clearly intends to negotiate with Mexico and Canada, and will likely do so under the threat of U.S. withdrawal from NAFTA, the recent tone of the comments from the administration appear to be pointing toward a renegotiation that would maintain strong trade relationships with Mexico and Canada.
In the meantime, the administration does not appear to have retreated, yet at least, from the Mexican-Carrier Rule. While in many other instances, the Trump Administration has openly changed positions in lawsuits initiated by or against the Obama Administration, in a recent oral argument before the U.S. Court of Appeals for the Ninth Circuit, the U.S. Department of Transportation (DOT) continued to advocate in favor of the Mexican-Carrier Rule. The position of the current administration was unequivocally stated on the record in an appeal by the Teamsters, joined in by intervenor Owner-Operator Independent Drivers Association (OOIDA). In the appeal, the Teamsters and OOIDA argued that the DOT's acceptance of applications from Mexico-domiciled motor carriers for permanent operating authority to haul freight in the U.S. was improper and based on inadequate study and data.
At a March 15, 2017, oral argument in response to direct questions from the Ninth Circuit judges deciding the case, DOT's legal counsel confirmed that the agency was still accepting and granting new applications from Mexican motor carriers and stated that "nothing has changed" as a result of the change in administrations.
Nonetheless, it is possible that the Mexico-Carrier Rule could be invalidated, in whole or in part, by the Ninth Circuit. In addition, the rule is likewise the subject of a collateral attack by Rep. Peter DeFazio (D-Ore.). On Feb. 16, 2017, Rep. DeFazio introduced the "Blueprint for America's New Trade Policy," which DeFazio described as principles for renegotiating NAFTA. The resolution calls for NAFTA's replacement, which, among other changes, "should require all foreign service providers' vehicles and drivers entering the United States to meet all United States highway safety and environmental standards before being granted access to and use of United States distribution and transportation systems."
So, while NAFTA continues to be a source of headlines and discussions, the Mexican-Carrier Rule remains in place but will also need to weather independent attacks.
Proposed Safety Fitness Determination Rule Withdrawn, Unlikely to Return
In an earlier article (see Holland & Knight's alert, "Is the Proposed Safety Fitness Determination Rule in Jeopardy?", Jan. 20, 2017), we addressed whether the Trump Administration would proceed with the proposed Safety Fitness Determination (SFD) rule. The rule would update the Federal Motor Carrier Safety Administration's (FMCSA) safety fitness rating methodology by integrating on-road safety data from inspections, along with the results of carrier investigations and crash reports, to determine a motor carrier's overall safety fitness on a monthly basis. The proposed SFD rule would update FMCSA's safety fitness rating methodology and replace the current three-tier federal rating system of "satisfactory-conditional-unsatisfactory" for federally regulated commercial motor carriers (in place since 1982) with a "fit" or "unfit" rating. The FMCSA published the Notice of Proposed Rulemaking (NPRM) with respect to the SFD on Jan. 21, 2016.
The proposed SFD rule would use Compliance, Safety, Accountability (CSA) data to classify the most at-risk carriers. CSA is the FMCSA's safety compliance and enforcement program, which uses Safety Management System (SMS) data to analyze carrier safety. The proposed rule was under consideration as required by the 2015 Surface Transportation bill, the Fixing America's Surface Transportation (FAST) Act. However, industry opponents of the SFD rule argue that the underlying SMS data is inaccurate.
Congress and the Obama Administration's FMCSA clashed over the use of CSA data. The Trump Administration has announced that it will implement a reduction in government regulations, announced in President Donald Trump's Executive Order titled "Reducing Regulation and Controlling Regulatory Costs." That being the case, and in the face of strong opposition to the SFD rule, it is not surprising that the FMCSA formally withdrew the proposed rulemaking in March 2017, stating that it "must receive the Correlation Study from the National Academies of Science, as required by the Fixing America's Surface Transportation (FAST) Act, assess whether and, if so, what corrective actions are advisable, and complete additional analysis before determining whether further rulemaking action is necessary to revise the safety fitness determination process." 82 Fed. Reg. 14848 (March 23, 2017).
The Correlation Study is expected to be completed in June 2017. Thereafter, the FMCSA will evaluate whether to issue another proposed SFD rule. However, given the current headwinds against new regulations generally, and the opposition that industry opponents have raised with respect to this particular proposed rule, it is not expected that the SFD rule will be back in the foreseeable future.
Administration Hands Trucking Companies a Quick Victory on Use of CSA Data
In an earlier article published just before President Donald Trump's inauguration (see Holland & Knight's alert, "Carriers Advocate for Data-Driven Regulations," Jan. 19, 2017), it was noted that railroads and trucking companies were aligned in their desire for regulations based on demonstrable data. Trucking companies have already received an early victory from the Trump Administration with respect to the use of Compliance Safety Accountability (CSA) data.
The trucking industry has long taken issue with the CSA data collected by the Federal Motor Carrier Safety Administration (FMCSA), calling into question whether that data is a good indicator of a trucking company's safety. CSA data is the safety data aggregated by the FMCSA and broken down into categories (BASICs), much of which had been public, and used to assess the safety of a motor carrier. Congress has required that the data be removed from public view while its efficacy is studied. Nevertheless, under the Obama Administration, the FMCSA issued an Notice of Proposed Rulemaking, indicating its intent to increase the use of CSA data as part of its safety fitness determinations. 81 Fed. Reg. 3562 (Jan. 21, 2016).
The FMCSA formally withdrew the proposed rulemaking in March 2017, stating that it "must receive the Correlation Study from the National Academies of Science, as required by the Fixing America's Surface Transportation (FAST) Act, assess whether and, if so, what corrective actions are advisable, and complete additional analysis before determining whether further rulemaking action is necessary to revise the safety fitness determination process." 82 Fed. Reg. 14848 (March 23, 2017). Critics of the rule appear to have convinced the FMCSA that it should, at minimum, take a wait-and-see approach regarding CSA data.
Independent Contractor Model Remains a Target
Our earlier article (see Holland & Knight's alert, "Will Trump Administration Curb the Recent Targeting of Independent Contractors?", Jan. 17, 2017) addressed whether the Trump Administration would attempt to turn the tide and promote regulatory and legislative initiatives that would favor the independent truck driver as a small business or shun the mantle of federal regulation in favor of a state's right to regulate the way in which the interstate trucking business is conducted. As its first 100 days comes to a close, the Trump Administration has not, as yet, reigned in the Obama Administration's targeting of the independent contractor model. However, the battle wages on in the courts and in Congress.
As previously reported, the defense of pre-emption under the Federal Aviation Administration Authorization Act of 1994 (FAAAA) has not completely shielded motor carriers from lawsuits alleging that the use of independent contractor truck drivers violates state wage and hour laws. Nonetheless, motor carriers continue to assert the defense. See, e.g., Remington v. J.B. Hunt Transport, Inc., C.A. No. 15-10010 (D. Mass.), Dkt. No. 67 (motion for judgment on the pleadings based in part on FAAAA preemption pending). In addition, it appears that the Senate Committee on Appropriations is considering new legislation aimed at addressing some of the FAAAA pre-emption issues that have arisen recently.
Meanwhile, many are disappointed that the U.S. Department of Labor and the National Labor Relations Board have not yet signaled a reversal of course on the Obama-era positions assailing the independent contractor model. Private litigation also continues to challenge the independent contractor model traditionally used by motor carriers while settlements of long-standing litigation have been reported at a faster pace. Moreover, as long as states continue to encourage targeting companies that operate with independent contractors, it will be difficult to put the genie back in the bottle even if the federal government does back off on the issue.
Trump Keeps Promise to Coal Industry, But How Much Will It Help?
In an earlier article leading up to President Donald Trump's inauguration (see Holland & Knight's alert, "Railroads May Benefit if Trump Keeps Promise to Energize Coal Industry," Jan. 19, 2017), it was noted that a few factors have negatively impacted the transportation of coal, including the relatively low price of natural gas and regulatory burdens with respect to coal. As a result, structural changes have already been made by power plants and railroads to move away from coal, and any improved coal prospects would need to be both substantial enough and sustained enough to alter the long-range planning of both industries and justify the large capital expenditures that would likely be necessary to utilize substantially more coal.
Among the many Executive Orders (EO) issued by President Trump in his first 100 days was "Promoting Energy Independence and Economic Growth," issued on March 28, 2017, which, among other things, focuses on putting coal miners back to work, a Trump campaign promise. (For a detailed analysis of the EO, see Holland & Knight's alert, "A Closer Look at President Trump's Executive Order on Energy Independence," April 12, 2017.)
Soon after the release of the EO, some media outlets have included similar statements regarding a return to the use of coal, including CNNMoney ("The falling price of natural gas is the primary reason for the plunge in use of coal by utilities") and NPR ("Renewable energy is surging. Natural gas is cheaper. The market forces just don't play in coal's favor"). However, some power plants might be able to take advantage of a coal resurgence. Jim Matheson, CEO of the National Rural Electric Cooperative Association, told NPR, "Some of our members are in a situation where they've got very expensive coal plants that had some investments made just recently for pollution control, and having the capacity to or the flexibility to run those and pay those down is really important to them and their particular consumers."
Railroads have made recent public statements that coal revenue is not something railroads should depend on long term. That said, a recent report from the Association of American Railroads showed that coal traffic in the first week of April was up 29 percent year-over-year. As mentioned in the previous article, one category of coal that presents an opportunity for increased rail transportation is export coal. If President Trump's EO or further congressional action is able to increase coal traffic, even marginally, railroads would benefit in the short term and it might smooth the transition to other commodities.
Antitrust Enforcement Under Trump: Less Intervention But Not Abandonment
Since the inauguration, the Trump Administration's antitrust enforcers at the Antitrust Division of the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) have not taken any formal actions that reveal how aggressive the new Administration will be in enforcing federal antitrust laws (see Holland & Knight's alert, "Will Trump Relax DOJ's Enforcement of Antitrust Laws?", Jan. 17, 2017). But the Administration has offered some clues, and those clues point to a less-interventionist approach to antitrust enforcement than we saw during the Obama Administration – but by no means an abandonment of antitrust enforcement altogether.
On March 27, 2017, President Donald Trump picked Makan Delrahim to head up antitrust enforcement at the DOJ. Delrahim served at the DOJ during the George W. Bush Administration, and, in that role and in other antitrust-related policy work in which he has been involved in the past, has established a strong reputation for principled, evidence-based enforcement of antitrust laws. He will likely not shy away from challenging mergers or anticompetitive conduct when intervention is warranted, but he is unlikely to support pushing the enforcement envelope by bringing cases based on novel economic theories. For example, Delrahim reportedly stated when AT&T's acquisition of Time Warner was announced in October 2016 that the deal, currently under review at the DOJ, was unlikely to pose antitrust problems because it did not involve the merger of direct competitors. (Trump, then the Republican presidential nominee, stated his disapproval of the deal at the time it was announced.)
At the FTC, President Trump named Commissioner Maureen Ohlhausen to serve as acting chair. She, like Delrahim, has a long track record of supporting antitrust enforcement but urges "regulatory humility" generally, respect for intellectual property rights and cases based on sound economic theory. Ohlhausen, for instance, opposed the FTC's challenge, in the closing days of the Obama Administration, to Qualcomm's patent licensing practices as "based on a flawed legal theory ... that lacks economic and evidentiary support." Ohlhausen also further demonstrated that the FTC will take a more humble enforcement approach than it did in the Obama Administration by touting the FTC's recent efforts to reduce the burden that FTC information requests impose on the businesses that receive them.