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 and how business planning could be impacted for those in the transportation sector. Our team then followed up with a May 2017 review of the Administration's first 100 days. In this alert, we have prepared updates, if relevant, on a number of transportation-related developments from the Trump Administration's first year and based on the President’s priorities as stated in the State of the Union on Jan. 30, 2018. Some key areas include issues involving Infrastructure, Motor Carriers, Rail, Aviation and Antitrust.
Trump Requests $1.5 Trillion for Infrastructure, Asks Congress to Move Quickly in 2018
By Norma M. Krayem
Early in 2017, the Trump Administration focused on the benefits of a bipartisan infrastructure plan, calling for action in the Administration's first 100 days. Although outreach efforts to the public and private sector commenced in 2017, issues around healthcare reform, tax issues and other legislative matters took priority.
In his State of the Union (SOTU) address on Jan. 30, 2018, President Donald Trump focused on the importance of infrastructure investments, calling on Congress to move a bill this year that provides $1.5 trillion and reinforcing the need for public-private partnerships (P3s), stating that, "Every federal dollar should be leveraged by partnering with state and local governments and, where appropriate, tapping into private sector investment to permanently fix the infrastructure deficit." The President's Fiscal Year (FY) 2019 budget is expected to include $1.5 trillion in investments, although details on where the $1.5 trillion will come from – whether through direct funding or via financing – is still unclear.
The White House Fact Sheet issued during the SOTU provided only high-level principles for the infrastructure plan, with most expecting further details in the FY 2019 budget. Themes include using portions of the proposed funds towards "incentivizing" and "empowering" state and local investments; a continued focus on streamlining the regulatory and permitting processes; focusing on rural infrastructure; and rebuilding and improving roads, water systems, broadband systems and power supply.
Just before the SOTU, media sources released an unofficial "Funding Principles" plan that provided additional details and focuses on a mix of grants as well as a continued emphasis on existing innovative finance programs such as the Transportation Infrastructure Finance and Innovation Act (TIFIA) Program, Private Activity Bonds (PABs), and the Water Infrastructure Finance and Innovation Act program (WIFIA) Program. These principles track a similar plan from the President's Infrastructure Initiative released in 2017, which also included a mix of direct grant dollars and innovative finance programs that have long been government mainstays.
The details of the potential plan to support a $1.5 trillion investment in infrastructure will be critical, and both the public and private sector will be waiting to see what the President will propose in the near future.
Proposed Safety Fitness Determination Rule Undergoing Further Study
By Lawrence J. Hamilton II
During 2017, the Federal Motor Carrier Safety Administration (FMCSA) shelved its plans to revise the way it rates the safety of motor carriers. By way of background, the FMCSA published a notice of proposed rulemaking in the Federal Register on Jan. 21, 2016, calling for replacement of the current three-tier federal rating system of "satisfactory," "conditional" or "unsatisfactory," which has been in place since 1982, with a "fit" or "unfit" determination. An "unfit" rating would require the carrier to either improve its operations or cease operations.
The proposed Safety Fitness Determination (SFD) rule would have updated FMCSA's safety fitness rating methodology by integrating on-road safety data from inspections, carrier investigations and crash reports to determine a motor carrier's overall safety fitness on a monthly basis. The proposed rule called for use of Compliance, Safety, Accountability (CSA) data to classify the most at-risk carriers as "unfit" rather than continue with the current three-tier system. Opponents of the proposed rule argue that the Safety Measurement System (SMS) data that underlies the CSA program is inaccurate and skewed by disparate enforcement among the states. Opponents also contend that the rule does not predict crashes by individual carriers.
One of President Donald Trump's first orders of business after his January 2017 inauguration was the call for a reduction in government regulation. Specifically, a freeze was announced calling for two regulations to be eliminated for each new rule that was implemented. Shortly thereafter, on March 22, 2017, the FMCSA withdrew its proposed SFD rule as it awaited a study of the agency's CSA program by the National Academy of Sciences (NAS) that is designed to evaluate the relationship between CSA data and crash risk. The NAS concluded in its June 27, 2017 report that "SMS is structured in a reasonable way, and its method of identifying motor carriers for alert status is defendable. However, much of what is now done is ad hoc and based on subject-matter expertise that has not been sufficiently empirically validated. This argues for FMCSA adopting a more statistically principled approach that can include the expert opinion that is implicit in SMS in a natural way."
There has been widespread opposition to the proposed SFD rule – and to the use of CSA data, in general – within the trucking industry. A new SFD rating system for motor carriers is not expected soon. If it were to ever surface, any replacement of CSA data that would be created would likely require the proposed rule to be substantially revised.
Mexican Carriers Still Can Operate and Lease Equipment in U.S., as NAFTA Remains Intact
By Lawrence J. Hamilton II and Jameson B. Rice
Although it was a topic of much discussion and speculation during the first year of the Trump Administration, the terms of the North American Free Trade Agreement (NAFTA) with Mexico and Canada have not been repealed or amended. It took more than 20 years after NAFTA was signed for Mexican motor carriers to be permitted to conduct operations in the U.S. beyond border zones, and the subject has been hotly contested throughout NAFTA's existence. (See Holland & Knight's alert, ""More Than 20 Years Later, Cross-Border Trucking Fight Under NAFTA Continues," Oct. 27, 2017.)
The Federal Motor Carrier Safety Administration (FMCSA) did not begin accepting applications from Mexico-based haulers for operating authority in the U.S. until 2015, with 38 Mexican carriers currently authorized for long-haul operations in the U.S. In addition, a rule became effective on Nov. 22, 2016 (two weeks after President Donald Trump was elected), to allow motor carriers domiciled in Mexico to lease their equipment to U.S. motor carriers regardless of the destination of the cargo, as long as the carriers comply with the federal leasing regulations. In such cases, the U.S. carrier assumes "complete responsibility for the operation of the equipment for the duration of the lease," FMCSA adds.
The U.S. trucking industry is divided on allowing Mexican carriers access to the U.S. market. The Teamsters and the Owner Operator Independent Drivers Association oppose the rule, whereas the American Trucking Associations (ATA) has supported allowing approved Mexico-based motor carriers to operate in the U.S., with ATA Chief Economist and Senior Vice President Robert Costello saying that the Mexican truck program has helped reduce congestion at U.S.-Mexico ports of entry.
Meanwhile, notwithstanding the Trump Administration's rhetoric, a large majority of economists polled recently in Mexico, Canada and the United States predict that NAFTA will likely be renegotiated successfully with only marginal changes. However, those discussions are ongoing and remain politically charged, so stay tuned.
Proposed Speed Limiter Rule Has Lost Traction
By Lawrence J. Hamilton II and Jameson B. Rice
The proposed Speed Limiter rule ran out of steam in 2017. Such a rule had been discussed for a decade, with the U.S. Department of Transportation (DOT), the National Highway Traffic Safety Administration (NHTSA) and the Federal Motor Carrier Safety Administration (FMCSA) pushing for a rule based on their position that a speed limiter rule would save lives and be more fuel efficient.
At the outset of the new administration last January, President Donald Trump announced a freeze on new regulations, calling for two regulations to be eliminated for each new rule that was implemented, and we addressed whether the Trump Administration would put a halt to the controversial rule, then later reported that its momentum had stalled. (See Holland & Knight's alerts, "Will the Trump Administration Hit the Brakes on the Speed Limiter Rule?", Jan. 9, 2017, and "Transportation Developments in the Trump Administration's First 100 Days," May 1, 2017.)
The Speed Limiter rule, which was officially proposed on Sept. 7, 2016, called for 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) to be equipped with a speed limiting device. The speed limits suggested for trucks in the proposed rule were 60, 65 and 68 mph. The rule received significant opposition, and many in the industry already use speed limiting devices on trucks even without a regulatory requirement. Given these circumstances, and the Trump Administration's reduction in regulations, it appears unlikely that the rule will be enacted anytime soon, if ever. DOT confirmed this expectation by officially moving the proposed rule off of its active rulemaking calendar to its "Long-Term Actions" list.
Electronic Logging Device Rule In Effect
By Lawrence J. Hamilton II and Jameson B. Rice
New regulations are out of favor under the Trump Administration, but one controversial rule regulating motor carriers has made it through unscathed. We published several articles in 2017 updating the status of the Electronic Logging Device (ELD) Rule, the enforcement of which took effect in December 2017. (See Holland & Knight's alerts, "Is There an Opening to Withdraw or Modify Electronic Logging Device Rule?", Jan. 13, 2017; "Transportation Developments in the Trump Administration's First 100 Days," May 1, 2017; and "Supreme Court's Refusal Keeps Electronic Logging Device Rule on Track," June 21, 2017.)
The ELD Rule, published by the Federal Motor Carrier Safety Administration (FMCSA) on Dec. 16, 2015, requires that ELDs be used that synchronize with vehicle engines to automatically record driving time for purposes of reporting hours of service (HOS) rather than using self-reported paper logbooks. 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.
The Owner-Operator Independent Drivers Association (OOIDA) led the opposition to the rule, but it was unsuccessful in its arguments to the U.S. Court of Appeals for the Seventh Circuit that the rule violated the Fourth Amendment's prohibition against unreasonable searches and seizures, among other arguments. The U.S. Supreme Court did not grant certiorari in OOIDA's appeal of that decision, and the group was unable to rally sufficient support from Congress or the Trump Administration to prevent the rule from taking effect. The American Trucking Associations – the largest U.S. trucking lobby – supported the rule.
Enforcement of the rule began Dec. 18, 2017, although trucking companies have received a small reprieve. Although inspectors and roadside officers began issuing citations and fines on Dec. 18 for failure to have an ELD or automatic onboard recording device, they will not place any vehicles out of service for the violation until April 1, 2018. This two-phase enforcement plan is consistent with the enforcement of previous major trucking regulations, according to the Commercial Vehicle Safety Alliance (CVSA) – a nonprofit association comprised of governmental commercial motor vehicle safety officials and industry representatives. The FMCSA has further emphasized that companies that continually violate the rule could be subject to federal investigation.
Transporters of agricultural commodities received a 90-day waiver from compliance with the ELD rule, and the FMCSA issued guidance on exemptions available to agriculture transportation. Apart from the 90-day waiver for agriculture drivers, few exemptions have been granted. Those that have been granted have been minor and technical.
Since implementation began, there have been some reports of ELD products not meeting FMCSA requirements. Some, especially smaller carriers, have not yet equipped their vehicles with ELDs, waiting for the hard enforcement deadline in April. However, citations for non-compliance with the rule can delay transportation. As a result, some shippers and those hiring owner-operator drivers have been monitoring and requiring drivers to have ELDs. Failure to have ELDs may also place owner-operator drivers and motor carriers in violation of compliance with law requirements that are customary in transportation agreements. The early signs are that the ELD mandate has not caused a dramatic shift in the industry, although the high demand for truck capacity and corresponding higher rates for service may be mitigating the cost of compliance, and the two-phase enforcement of the rule may be easing the transition. The true impact of the rule will likely begin to take shape in April.
Complex Item Response Theory Recommended as Replacement for CSA Data
By Jameson B. Rice
Last year brought about the end of the Compliance Safety Accountability (CSA) program, the much-maligned system of data used by the Federal Motor Carrier Safety Administration (FMCSA) to assess the safety of a motor carrier. But the replacement may not be what some carriers were expecting. 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. In an update following Trump's first 100 days in office, it was reported that trucking companies had received an early victory from the Trump Administration with respect to the use of CSA data. (See Holland & Knight's alert, "Transportation Developments in the Trump Administration's First 100 Days," May 1, 2017.)
CSA program data is broken down into categories (BASICs), much of which had been public, and used to assess the safety of a motor carrier. The trucking industry has long taken issue with the CSA data collected by the FMCSA, calling into question whether that data is a good indicator of a trucking company's safety. Congress required that the data be removed from public view while its efficacy was 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 [Academy of Sciences], 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 National Academy of Sciences (NAS) released the results of its study on June 27, 2017, which concluded that the FMCSA's Safety Measurement System (SMS) – part of its CSA program – was conceptually sound and reasonable but needed to be improved. While the report was complimentary of various ideas and efforts of the FMCSA, it validated complaints of carriers that SMS data was not consistent or reliable. The NAS report recommended that, over the next two years, regulators develop a more "statistically principled approach" based on an "item response theory." In other words, the NAS recommended further study and a more in-depth methodology that delves deeper into the data and measures the performance of individual commercial vehicles. Implementing item response theory will include very complex datasets and new information that carriers do not currently share with the FMCSA, including vehicle miles traveled by state, driver pay and driver retention.
The FMCSA is in the process of creating a corrective action plan, which was mandated by Congress, and has solicited public comment on the development and implementation of that action plan. The agency indicated that it intends to attempt to implement the NAS recommendations, and will work with industry and the public to help develop a new program.
A Shift on Joint Employment and Independent Contractors
By Linda Auerbach Allderdice, Lawrence J. Hamilton II and Michael T. Maroney
Early last year, we raised the question of whether the new Trump Administration would reverse course on the Obama-era positions assailing the independent contractor model. (See Holland & Knight's alerts, "Will Trump Administration Curb the Recent Targeting of Independent Contractors?", Jan. 17, 2017, and "Transportation Developments in the Trump Administration's First 100 Days," May 1, 2017.) As we mark the one-year anniversary of the Administration, we reflect upon two key actions taken by the U.S. Department of Labor (DOL) and National Labor Relations Board (NLRB) representing a significant shift in the previous administration's positions.
In June 2017, the DOL withdrew two guidance documents on joint employment and independent contractors issued during the Obama Administration. The administrator interpretations issued in 2015 and 2016 took a broad view of the definition of "employment" and "joint employment" under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act. Although the DOL noted that the withdrawal did not change the legal responsibilities of employers under these two laws, the removal of these guidance documents from its website is significant.
In December 2017, the NLRB overruled Browning-Ferris Industries of California, Inc., a decision issued during the Obama Administration that materially expanded the doctrine of joint employment under the National Labor Relations Act (NLRA). In so doing, the NLRB returned to a narrower standard that requires demonstrating that a company exercised direct and immediate control over the employee in order to be liable as a joint employer, rather than the indirect control or ability to exert control standard under Browning-Ferris. Also at the end of last year, the U.S. House of Representatives passed the Save Local Business Act bill, H.R. 3441, which seeks to amend the NLRA and FLSA to provide that a person may be considered a joint employer only if such person directly, actually and immediately exercises significant control over the essential terms and conditions of employment. That bill is currently before the Senate for consideration.
While the battle over the independent contractor model wages on in the courts, at the state level and in Congress, the Trump Administration is reining in the previous administration's policies, a development that has been applauded by the U.S. Chamber of Commerce, the National Retail Federation and other trade groups.
Coal Jobs Up Slightly on Growth of Export Coal
By Jameson B. Rice
Putting coal miners back to work was one of President Donald Trump's pledges when campaigning. In an article leading up to 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 more coal – and thus put more coal miners back to work – in any meaningful and lasting way.
As noted in a follow-up after Trump's first 100 days in office (see Holland & Knight's alert, "Transportation Developments in the Trump Administration's First 100 Days", May 1, 2017), among the many Executive Orders (EO) issued by 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. (See Holland & Knight's alert, "A Closer Look at President Trump's Executive Order on Energy Independence," April 12, 2017.)
Coal mining jobs in the U.S. did increase by 771 in the past year, an increase of approximately 1.5 percent. West Virginia saw the largest increase, and Pennsylvania added coal mining jobs as well. However, Ohio, Kentucky, Maryland, Montana, Wyoming, Indiana, New Mexico and Texas all lost coal mining jobs, and Pennsylvania's numbers may now be on the decline after a mine in the state employing a reported 370 people announced recently that it would be closing.
Domestic demand for coal has not substantially increased, and coal-fired power plants continue to close. However, there has been a rise in export coal, with the National Mining Association reporting a five-fold increase in demand from a year ago. The Trump Administration's efforts and market forces likely share credit for this trend, although the percentage share of credit is subject to debate. It is uncertain if market forces will continue to support export coal. Prices for coal rose substantially after China imposed a limit on domestic mining to shrink excess capacity. Weather-related issues in Australia and a corruption investigation at an Indonesian port also disrupted supply, and France experienced widespread shutdowns at nuclear power plants, increasing demand.
If this trend continues, coal transportation routes may look more like intermodal container routes, with an emphasis on ports. This may draw objection from some coastal states. For example, in September 2017, the state of Washington denied a company the permits necessary to develop a coal export terminal. The developers recently sued the state in response.
In order to justify investment in the infrastructure to make a substantial increase in the ability to increase coal supply abroad, it will take long-range projections that support a reliable export coal business model. Time will tell whether such a case can be made. Although some are betting on such prospects, many industry analysts doubt the export coal market will stay as hot as it was in 2017.
Montreal Protocol 2014 Not a Priority at Administration's One-Year Mark
By Judith R. Nemsick
Although airline disruptions caused by unruly passengers have shown no signs of abating, Montreal Protocol 2014 does not appear to be on the State Department's short-term agenda as the Trump Administration marks its first year. (See Holland & Knight's alert, "Trump Administration Could Ratify Montreal Protocol 2014 Addressing Unruly Airline Passengers," Jan. 20, 2017.) The Protocol, designed to strengthen the airlines' position in handling unruly passenger situations, is not on the list of treaties before the U.S. Senate.
On the global front, there are four ratifications and eight accessions to date. For the treaty to take effect, 22 countries must ratify, accept, accede or approve it.
Trump Antitrust Enforcement Has Not Fallen by the Wayside
By David C. Kully and Andrew J. Steif
The first year of the Trump Administration has confirmed Holland & Knight's prediction that we would see no abandonment of antitrust enforcement. (See Holland & Knight's alerts, "Will Trump Relax DOJ's Enforcement of Antitrust Laws?", Jan. 17, 2017, and "Transportation Developments in the Trump Administration's First 100 Days," May 1, 2017.) But because President Donald Trump's antitrust enforcement team is not yet fully in place, there remains some uncertainty as to how aggressive the Administration will ultimately prove to be.
The President's nominee to lead the U.S. Department of Justice's (DOJ) Antitrust Division, Makan Delrahim, was confirmed by the U.S. Senate in September 2017. The five-person Federal Trade Commission (FTC), however, has been operating under the guidance of only two commissioners since February 2017. On Jan. 25, 2018, the President took his first steps to fill the ranks at the FTC by making four nominations. President Trump nominated antitrust attorney Joseph Simons – who served as director of the FTC's Bureau of Competition from 2001 to 2003 – to become FTC Chairman. Simons will replace current Acting Chair Maureen Ohlhausen, who was nominated by the President to become a judge for the U.S. Court of Federal Claims. The President also nominated Noah Phillips, currently chief counsel for Senate Majority Whip John Cornyn (R-Texas), and Delta Airlines executive Christine Wilson to fill Republican seats at the FTC, and consumer advocate Rohit Chopra to fill a Democratic seat. Sen. Chuck Schumer (D-N.Y.) reportedly recommended that his chief counsel, Rebecca Slaughter, fill the remaining Democratic seat, but the President has not yet made a formal nomination for the remaining vacancy.
Neither enforcement agency rested as they awaited the arrival of new leadership. The DOJ and FTC have not pursued significant enforcement actions in the transportation sector, but they have remained active in other industries. Although some uncertainty remains, businesses should not expect antitrust enforcement to fall by the wayside.